Question
The 2017 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2017 Sales $ 300,000 Costs 200,000 EBIT $ 100,000 Interest expense 20,000 Taxable
The 2017 financial statements for Growth Industries are presented below.
INCOME STATEMENT, 2017
Sales $ 300,000
Costs 200,000
EBIT $ 100,000
Interest expense 20,000
Taxable income $ 80,000
Taxes (at 35%) 28,000
Net income $ 52,000
Dividends $ 15,600
Addition to retained earnings 36,400
BALANCE SHEET, YEAR-END, 2017
Assets Liabilities Current assets Current liabilities Cash $ 6,000
Accounts payable $ 13,000
Accounts receivable 11,000
Total current liabilities $ 13,000
Inventories 33,000
Long-term debt 200,000
Total current assets $ 50,000
Stockholders equity Net plant and equipment 240,000
Common stock plus additional paid-in capital 15,000
Retained earnings 62,000
Total assets $ 290,000
Total liabilities and stockholders' equity $ 290,000
Sales and costs are projected to grow at 30% 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 75% 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 0.30. What is the required external financing over the next year?
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Financial Markets And Institutions
Authors: Frederic S. Mishkin, Stanley Eakins
6th International Edition
0321552113, 9780321552112
