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The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 30 percent. Interest expense will remain constant; the
The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. |
CROSBY, INC. 2017 Income Statement | ||||||
Sales | $ | 749,000 | ||||
Costs | 584,000 | |||||
Other expenses | 20,000 | |||||
Earnings before interest and taxes | $ | 145,000 | ||||
Interest paid | 16,000 | |||||
Taxable income | $ | 129,000 | ||||
Taxes (21%) | 27,090 | |||||
Net income | $ | 101,910 | ||||
Dividends | $ | 31,592 | ||||
Addition to retained earnings | 70,318 | |||||
CROSBY, INC. Balance Sheet as of December 31, 2017 | |||||||
Assets | Liabilities and Owners’ Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 20,840 | Accounts payable | $ | 55,000 | ||
Accounts receivable | 43,780 | Notes payable | 14,200 | ||||
Inventory | 93,960 | Total | $ | 69,200 | |||
Total | $ | 158,580 | Long-term debt | $ | 132,000 | ||
Fixed assets | Owners’ equity | ||||||
Net plant and equipment | $ | 425,000 | Common stock and paid-in surplus | $ | 115,500 | ||
Retained earnings | 266,880 | ||||||
Total | $ | 382,380 | |||||
Total assets | $ | 583,580 | Total liabilities and owners’ equity | $ | 583,580 | ||
If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales? |
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