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The most recent financial statements for Company Y, follow. Sales for 2021 are projected to grow by (25 - 1 x 8 ) percent. Interest
- The most recent financial statements for Company Y, follow. Sales for 2021 are projected to grow by (25 - 1 x 8) 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.
- 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.
Income Statement | |||
2021 | 2020 | ||
Sales | 5,000 | ||
Costs | 4,000 | ||
EBIT |
| 1,000 | |
Interest Expenses | 150 | ||
Taxable Income |
| 850 | |
Taxes | 238 | ||
Net income |
| 612 | |
Dividends | 200 | ||
Additional to RE | 412 |
Balance Sheet |
| |||||||||
2021 | 2020 | 2021 | 2020 | |||||||
Current Assets | Current Liabilities | |||||||||
Cash | 900 | Accounts Payable | 600 | |||||||
Accounts Receivable | 520 | Notes Payable | 250 | |||||||
Inventory | 130 | Total |
| 850 | ||||||
Total |
| 1,550 | ||||||||
Long-Term Debt | 1,780 | |||||||||
Fixed Assets | ||||||||||
Net Plant & Equipment | 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 |
| ||||
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