Problem 18-12 Using Percentage of Sales (LO2)

Eagle Sports Supply has the following financial statements. Assume that Eagles assets are proportional to its sales.

INCOME STATEMENT, 2019
Sales	$	1,600
Costs		310
Interest		50
Taxes		260
Net income	$	980

BALANCE SHEET, YEAR-END
	2018				2019					2018				2019
Assets	$	4,100			$	4,400			Debt	$	1,400			$	1,500
									Equity		2,700				2,900
Total	$	4,100			$	4,400			Total	$	4,100			$	4,400

a. Find Eagles required external funds if it maintains a dividend payout ratio of 70% and plans a growth rate of 20% in 2020. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item?

c. What will be the value of this balancing item? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

d. Now suppose that the firm plans instead to increase long-term debt only to $1,600 and does not wish to issue any new shares of stock. What is now the balancing item?

e. What will be the value of this new balancing item? (Do not round intermediate calculations. Round your answer to the nearest whole number.)

a.	External funding need
b.	Balancing item
c.	Value
d.	Balancing item.
e.	Value