Question
The 2017 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2017 Sales $ 340,000 Costs 220,000 EBIT $ 120,000 Interest expense 24,000 Taxable
- The 2017 financial statements for Growth Industries are presented below.
INCOME STATEMENT, 2017
Sales
$
340,000
Costs
220,000
EBIT
$
120,000
Interest expense
24,000
Taxable income
$
96,000
Taxes (at 35%)
33,600
Net income
$
62,400
Dividends
$
18,720
Addition to retained earnings
43,680
BALANCE SHEET, YEAR-END, 2017
Assets
Liabilities
Current assets
Current liabilities
Cash
$
3,000
Accounts payable
$
10,000
Accounts receivable
8,000
Total current liabilities
$
10,000
Inventories
29,000
Long-term debt
240,000
Total current assets
$
40,000
Stockholders' equity
Net plant and equipment
280,000
Common stock plus additional paid-in capital
15,000
Retained earnings
55,000
Total assets
$
320,000
Total liabilities and stockholders' equity
$
320,000
Sales and costs are projected to grow at 40% 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 70% 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.
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Exchange Rates and International Finance
Authors: Laurence Copeland
6th edition
273786040, 978-0273786047
