Question
Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.4 million. The firm also
Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.4 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $8.4 million next year. Fixed assets are currently fully utilized, and the nature of Wall-Es fixed assets is such that they must be added in $1 million increments.
Assets | Liabilities and Equity | |||||||
Current assets | $ | 1,664,000 | Current liabilities | $ | 1,984,000 | |||
Fixed assets | 4,096,000 | Long-term debt | 1,800,000 | |||||
Equity | 1,976,000 | |||||||
Total assets | $ | 5,760,000 | Total liabilities and equity | $ | 5,760,000 | |||
If current assets and current liabilities are expected to grow with sales, what amount of additional funds will Wall-E need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)
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