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The most recent financial statements for Scott, Inc., appear below. Sales for 2020 are projected to grow by 30 percent. Interest expense will remain constant;
The most recent financial statements for Scott, Inc., appear below. Sales for 2020 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate also will remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. |
SCOTT, INC. 2019 Income Statement | ||||||
Sales | $ | 761,000 | ||||
Costs | 596,000 | |||||
Other expenses | 32,000 | |||||
Earnings before interest and taxes | $ | 133,000 | ||||
Interest expense | 28,000 | |||||
Taxable income | $ | 105,000 | ||||
Taxes (23%) | 24,150 | |||||
Net income | $ | 80,850 | ||||
Dividends | $ | 25,064 | ||||
Addition to retained earnings | 55,786 | |||||
SCOTT, INC. Balance Sheet as of December 31, 2019 | |||||||
Assets | Liabilities and Owners Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 22,040 | Accounts payable | $ | 56,200 | ||
Accounts receivable | 44,980 | Notes payable | 15,400 | ||||
Inventory | 105,960 | Total | $ | 71,600 | |||
Total | $ | 172,980 | Long-term debt | $ | 144,000 | ||
Fixed assets | Owners equity | ||||||
Net plant and equipment | $ | 437,000 | Common stock and paid-in surplus | $ | 121,500 | ||
Retained earnings | 272,880 | ||||||
Total | $ | 394,380 | |||||
Total assets | $ | 609,980 | Total liabilities and owners equity | $ | 609,980 | ||
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? (Do not round intermediate calculations.) |
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