Question 2

The most recent financial statements for Summer Tyme, Inc., are shown here:

Income Statement		Balance Sheet
Sales	$3,700	Current assets	$3,900	Current liabilities	$910
Costs	2,300	Fixed assets	5,800	Long-term debt	3,570
Taxable income	$1,400			Equity	5,220
Taxes (31%)	434	Total	$9,700	Total	$9,700
Net income	$966

Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 60 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 30 percent.

Required:

What is the external financing needed? (Do not round your intermediate calculations.)

rev: 09_17_2012

$2,407.68

$2,084.68

$2,184.68

$1,071

$2,134.68

Question 3

The most recent financial statements for Live Co. are shown here:

Income Statement		Balance Sheet
Sales	$4,700	Current assets	$4,996	Debt	$9,988
Costs	3,102	Fixed assets	12,230	Equity	7,238
Taxable income	$1,598	Total	$17,226	Total	$17,226
Taxes (34%)	543
Net income	$1,055

Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 38 percent dividend payout ratio. No external equity financing is possible.

Required:

What is the internal growth rate? (Do not round your intermediate calculations.)

rev: 09_17_2012

3.95%

4.05%

2.38%

3.85%

9.93%