sales Spontaneous assets Spontaneous liabilities A/S L/S PS2 1-D 15,000,000 0.8000 0.2500 RFN 2,500,000 Assets \begin{tabular}{lr} Cash & 5,750,000 \\ \hline Accounts receivable & 17,250,000 \\ \hline Inventory & 23,000,000 \\ \hline Net fixed assets & 46,000,000 \\ \hline Total assets & 92,000,000 \end{tabular} Liabilities and Shareholders Equity \begin{tabular}{|l|r|} \hline Account payable & 17,250,000 \\ \hline Accruals & 11,500,000 \\ \hline Notes payable & 9,500,000 \\ \hline Long-term bonds & 5,000,000 \\ \hline Common stock & 10,000,000 \\ \hline Retained earning & 38,750,000 \\ \hline Total liabilities and shareholders equity & 92,000,000 \\ \hline \end{tabular} The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 20X1 was $33 million. Notes payable are currently $7 million. Long-term bonds and common stock are constant at $5 million and $10 million, respectively. a. How much additional external capital will be required for next year if sales increase 15 percent? (Assume that the company is already operating at full capacity.) b. What will happen to external fund requirements if Mansfield Corporation reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately. c. Prepare a pro forma balance sheet for 20X2, assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part b in answering this question (i.e., use the original information and part a in constructing your pro forma balance sheet). sales Spontaneous assets Spontaneous liabilities A/S L/S PS2 1-D 15,000,000 0.8000 0.2500 RFN 2,500,000 Assets \begin{tabular}{lr} Cash & 5,750,000 \\ \hline Accounts receivable & 17,250,000 \\ \hline Inventory & 23,000,000 \\ \hline Net fixed assets & 46,000,000 \\ \hline Total assets & 92,000,000 \end{tabular} Liabilities and Shareholders Equity \begin{tabular}{|l|r|} \hline Account payable & 17,250,000 \\ \hline Accruals & 11,500,000 \\ \hline Notes payable & 9,500,000 \\ \hline Long-term bonds & 5,000,000 \\ \hline Common stock & 10,000,000 \\ \hline Retained earning & 38,750,000 \\ \hline Total liabilities and shareholders equity & 92,000,000 \\ \hline \end{tabular} The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 20X1 was $33 million. Notes payable are currently $7 million. Long-term bonds and common stock are constant at $5 million and $10 million, respectively. a. How much additional external capital will be required for next year if sales increase 15 percent? (Assume that the company is already operating at full capacity.) b. What will happen to external fund requirements if Mansfield Corporation reduces the payout ratio, grows at a slower rate, or suffers a decline in its profit margin? Discuss each of these separately. c. Prepare a pro forma balance sheet for 20X2, assuming that any external funds being acquired will be in the form of notes payable. Disregard the information in part b in answering this question (i.e., use the original information and part a in constructing your pro forma balance sheet)
