Question
Lets return to the Hoffman Company. You are presented with the following income statement and balance sheet information for Hoffman: Hoffman Company Balance Sheets as
Lets return to the Hoffman Company. You are presented with the following income statement and balance sheet information for Hoffman:
Hoffman Company
Balance Sheets as of December 31, 2021 and 2022
2021 2022 Accounts Payable $ 221 $ 245 Short-term Notes Payable 412 300 Long-term Deferred Taxes 617 712 Long-term Debt 1,954 2,945 Common Stock 322 322 Retained Earnings <219> <209> Total Liabilities & Equity $3,307 4,315 |
2021 2022 Cash $ 40 $ 86 Marketable securities 24 20 Accounts receivable 225 304 Inventory 884 891 Net Fixed Assets 2,134 3,014
Total Assets $3,307 4,315 |
Hoffman Company
2022 Income Statement
Sales $2,918
Less: Cost of Goods Sold 1,645
Less: Depreciation 221
Earnings Before Interest and Taxes 1,052
Less: Interest Paid 197
Earnings Before Taxes 855
Taxes 845
Net Income $ 10
Assume that all costs, assets, and accounts payable change spontaneously with sales. For simplicitys sake, assume interest expense also changes spontaneously with sales (even though you know it may not). The tax rate and dividend payout ratios remain constant. If the firms managers project a growth rate of 15 percent next year, answer the following:
What amount of external financing will be needed (if any) to support this level of growth? Show your work.
Based off your response to the previous question, if you determined that some external financing would be necessary to support the level of sales growth, how could it be achieved? If no external financing is needed, simply state so.
Looking for all calculations and how the end result, the EFN was arrived at.
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