Problem 2. Calculate the external financing needed for the following company based on the following information. Mid-State predicts sales to grow by 10%. All costs, assets, current liabilities are proportional to sales. Long-term debt is projected to stay the same. Mid-State will keep the same payout ratio.

Mid-State Financial Statements

Income Statement

Sales $ 4,250

Costs 3,875

Taxable Income $ 375

Taxes (34%) 127.50

Net Income $247.50

Dividends $99

Additions to Ret. Earnings $148.50

Balance Sheet

Assets Liabilities & Equity

Current assets $900 Current liabilities $500

Net fixed assets 2,200 Long-term debt 1,800

Owners equity 800

Total Assets $3,100 Total Liab & Equity $3,100