Question
Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.9 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 $6.9 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.9 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 | $ | 1,449,000 | Current liabilities | $ | 1,725,000 | ||
Fixed assets | 4,761,000 | Long-term debt | 1,550,000 | ||||
Equity | 2,935,000 | ||||||
Total assets | $ | 6,210,000 | Total liabilities and equity | $ | 6,210,000 | ||
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.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started