The following tables summarizes the 2019 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year. INCOME STATEMENT, 2019 (Figures in $ thousands) Sales $ 1,240 (40% of average assets) Costs 930 (75% of sales) Interest 28 (5% of debt at start of year) Pretax profit 113 (40% of pretax profit) Net income $ 282 Tax $ 169 a Assets at the end of 2018 were $3,000,000. Debt at the end of 2018 was $560,000. BALANCE SHEET, YEAR-END (Figures in thousands) Assets $ 3,200 Equity Total $ 3,200 Debt $ 560 2,640 $3,200 a. What is the implied level of assets at the end of 2020? (Do not round your intermediate calculations. Enter your answer in thousands.) b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020? (Do not round your intermediate calculations. Enter your answer in thousands.) c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) a. b. Implied level of assets Additional cash Debt ratio C. The following tables summarizes the 2019 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year. INCOME STATEMENT, 2019 (Figures in $ thousands) Sales $ 1,240 (40% of average assets) Costs 930 (75% of sales) Interest 28 (5% of debt at start of year) Pretax profit 113 (40% of pretax profit) Net income $ 282 Tax $ 169 a Assets at the end of 2018 were $3,000,000. Debt at the end of 2018 was $560,000. BALANCE SHEET, YEAR-END (Figures in thousands) Assets $ 3,200 Equity Total $ 3,200 Debt $ 560 2,640 $3,200 a. What is the implied level of assets at the end of 2020? (Do not round your intermediate calculations. Enter your answer in thousands.) b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020? (Do not round your intermediate calculations. Enter your answer in thousands.) c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020? (Do not round your intermediate calculations. Round your answer to 2 decimal places.) a. b. Implied level of assets Additional cash Debt ratio C
