Problem 4 27 Percent of sales method LO4 3 Owens Electronics has nine operating plants in seven southwestern states Sales for last year were $100 million, and the balance sheet at year end is similar in percentage of sales to that of previous years (and this will continue in the future) All assets (including fixed assets) and current liabilities will vary directly with sales The firm is working at full capacity Balance Sheet (in $ millions) Assets Liabilities and Stockholders' Equity Cash $ 11 Accounts payable $ 16 Accounts receivable 25 Accrued wages 8 Inventory 28 Accrued taxes 10 Current assets $ 64 Current liabilities $ 34 Fixed assets 46 Notes payable 12 Common stock 18 Retained earnings 46 Total assets $ 110 Total liabilities and stockholders' equity $ 110 Owens Electronics has an aftertax profit margin of 10 percent and a dividend payout ratio of 60 percent If sales grow by 25 percent next year, determine how many dollars of new funds are needed to finance the growth (Do not round intermediate calculations Enter your answer in dollars, not millions, (e g , $1,234,567) )

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 07, 2024

Problem 4-27 Percent-of-sales method [LO4-3] Owens Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and the balance

Problem 4-27 Percent-of-sales method [LO4-3]

Owens Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales. The firm is working at full capacity.

Balance Sheet (in $ millions)
Assets			Liabilities and Stockholders' Equity
Cash	$	11	Accounts payable	$	16
Accounts receivable		25	Accrued wages		8
Inventory		28	Accrued taxes		10
Current assets	$	64	Current liabilities	$	34
Fixed assets		46	Notes payable		12
			Common stock		18
			Retained earnings		46
Total assets	$	110	Total liabilities and stockholders' equity	$	110

Owens Electronics has an aftertax profit margin of 10 percent and a dividend payout ratio of 60 percent.

If sales grow by 25 percent next year, determine how many dollars of new funds are needed to finance the growth. (Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567).)