The Big One-Volt Company makes really large one-volt batteries. Its highly simplified financial statements for 2019 and 2020 appear at the end of this assignment. The Big Volt guys are putting to use the Percentage of Sales Model, and are wondering what their various accounts would look like in 2023 if they manage to increase sales by 45% over 2020s sales.

a) What were dividends for 2020?

b) If the dividend policy is changed so that the payout ratio for 2020 is 50%, how will the asset expansion (of $1,600) be financed?

BIG ONE-VOLT CORPORATION 1 STATEMENT OF COMPREHENSIVE INCOME 2019 2020 Revenues 6000 9000 - COGS 2 (1800) (2700) Gross Profit 4200 6300 - Operating Expenses (1680) (2520) EBIT 2520 3780 - Interest 4 (325) (1760) EBT 2195 2020 - Taxes 5 549 505 E (i.e., earnings, net income, profit) 1646 1515 2019 2020 2980 2230 22000 39550 24980 41780 STATEMENT OF FINANCIAL POSITION Assets Current Non-current Total Assets Liabilities Current Non-current Total Liabilities Equity Shareholder capitalization Retained Earnings 8 Total Equity 1750 1750 1500 15850 3250 17600 20578 23120 1152 1060 21730 24180 NOTES all numbers are in thousands of dollars 2 30% of sales 3 40% of sales + interest on total debt is 10% per year 5 total corporate taxes are 25% Current assets for 2020 include: cash=180, receivables=50, and inventory=2000 Comprised exclusively of PPE net of depreciation the payout ratio is 30% BIG ONE-VOLT CORPORATION 1 STATEMENT OF COMPREHENSIVE INCOME 2019 2020 Revenues 6000 9000 - COGS 2 (1800) (2700) Gross Profit 4200 6300 - Operating Expenses (1680) (2520) EBIT 2520 3780 - Interest 4 (325) (1760) EBT 2195 2020 - Taxes 5 549 505 E (i.e., earnings, net income, profit) 1646 1515 2019 2020 2980 2230 22000 39550 24980 41780 STATEMENT OF FINANCIAL POSITION Assets Current Non-current Total Assets Liabilities Current Non-current Total Liabilities Equity Shareholder capitalization Retained Earnings 8 Total Equity 1750 1750 1500 15850 3250 17600 20578 23120 1152 1060 21730 24180 NOTES all numbers are in thousands of dollars 2 30% of sales 3 40% of sales + interest on total debt is 10% per year 5 total corporate taxes are 25% Current assets for 2020 include: cash=180, receivables=50, and inventory=2000 Comprised exclusively of PPE net of depreciation the payout ratio is 30%