Question
The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, Costs include interest. Assume that Isabellas assets are proportional to
The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, Costs include interest. Assume that Isabellas assets are proportional to its sales.
| Income Statement | ||
| Sales | $ | 3,950 |
| Costs |
| 1,750 |
| Pretax income | $ | 2,200 |
| Taxes (at 40.0%) |
| 880 |
| Net income | $ | 1,320 |
| Balance Sheet, Year-End | |||||||||||||
|
| 2019 |
| 2018 |
|
| 2019 |
| 2018 | |||||
| Net assets | $ | 6,000 |
| $ | 5,700 |
| Debt | $ | 2,500 |
| $ | 2,400 | |
|
|
|
|
|
|
|
| Equity |
| 3,500 |
|
| 3,300 | |
| Total | $ | 6,000 |
| $ | 5,700 |
| Total | $ | 6,000 |
| $ | 5,700 | |
a. Find Isabellas required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 35% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant.
b. If Isabella Painting Supply chooses not to issue new shares of stock, what is the value of debt in 2020?
c. Suppose that the firm plans instead to increase long-term debt only to $3,350 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now?
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The Role Of Modern Accounting Practices In Businesses Financial Stability And Sustainable Development During Digital Era And Artificial Intelligence Applications
Authors: Ibrahim Mert
1st Edition
3631894252, 3631894333, 9783631894255, 9783631894330
