1. The most recent financial statements for Company Y, follow. Sales for 2021 are projected to grow by (25 - 1 x 3) 72 percent. Interest expense will be increased to $200; the tax rate is 28%. Current assets increase spontaneously with sales. Costs-to-Sales ratio would be 90%, payout ratio will be 30%, and accounts payable will be increased by $50. If the firm is operating at 93% capacity and no new debt or equity is issued, what external financing is needed to support the growth rate in sales? Formula is not needed. (11 marks)

2. If the company decides to have a long-term Debt to Equity Ratio of 50%, how much fund should be raised from shareholders. Show your working. (4 marks)

ANSWER Q1a. (Formula is not needed for part a.)

Income Statement
		2021	2020
Sales		8600	5,000
Costs		7740	4,000
EBIT		860	1,000
Interest Expenses		200	150
Taxable Income		460	850
Taxes		128.8	238
Net income		331.2	612
Dividends		99.36	200
Additional to RE		231.84	412

Balance Sheet
		2021	2020				2021		2020
Current Assets				Current Liabilities
Cash			900	Accounts Payable			650		600
Accounts Receivable			520	Notes Payable					250
Inventory			130	Total					850
Total			1,550
				Long-Term Debt			1780		1,780
Fixed Assets
Net Plant & Equipment		2500	2,500	Owners' equity
				Common Stocks & Paid-in Surplus				920
				Retained Earnings					500
				Total					1,420
Total Assets			4,050	Total Liabilities & Owners' Equity				4,050

EFN = ___________