Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60. If Growth Industries is operating at only 75% of capacity, how much can sales grow before the firm will need to raise any external funds? Assume that once fixed assets are operating at capacity, they will need to grow thereafter in direct proportion to sales. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.)
The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends $ 22,752 Addition to retained earnings $ 15,168 $ 220,000 160,000 $ 60,000 12,000 $ 48,000 10,080 $ 37,920 Assets Current assets Cash Accounts receivable Inventories Total current assets Net plant and equipment BALANCE SHEET, YEAR-END, 2019 Liabilities Current liabilities $ 5,000 Accounts payable 10,000 Total current liabilities 25,000 Long-term debt $ 40,000 Stockholders' equity 160,000 Common stock plus additional paid-in capital Retained earnings $ 200,000 Total liabilities plus stockholders' equity $ 12,000 $ 12,000 120,000 15,000 53,000 $ 200,000 Total assets Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60. If Growth Industries is operating at only 75% of capacity, how much can sales grow before the firm will need to raise any external funds? Assume that once fixed assets are operating at capacity, they will need to grow thereafter in direct proportion to sales. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Final sales The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales Costs EBIT Interest expense Taxable income Taxes (at 21%) Net income Dividends $ 22,752 Addition to retained earnings $ 15,168 $ 220,000 160,000 $ 60,000 12,000 $ 48,000 10,080 $ 37,920 Assets Current assets Cash Accounts receivable Inventories Total current assets Net plant and equipment BALANCE SHEET, YEAR-END, 2019 Liabilities Current liabilities $ 5,000 Accounts payable 10,000 Total current liabilities 25,000 Long-term debt $ 40,000 Stockholders' equity 160,000 Common stock plus additional paid-in capital Retained earnings $ 200,000 Total liabilities plus stockholders' equity $ 12,000 $ 12,000 120,000 15,000 53,000 $ 200,000 Total assets Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60. If Growth Industries is operating at only 75% of capacity, how much can sales grow before the firm will need to raise any external funds? Assume that once fixed assets are operating at capacity, they will need to grow thereafter in direct proportion to sales. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) Final sales
