Question
Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.0 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 $6.0 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.0 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 | $ | 1,800,000 | Current liabilities | $ | 1,620,000 | ||
Fixed assets | 3,960,000 | Long-term debt | 2,000,000 | ||||
Equity | 2,140,000 | ||||||
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? |
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