Using the tables below, find

a. the external financing needed for year 2013, and

b. the internal growth rate for the year 2012.

Use the following assumptions to solve:

1. We are projecting a 20% increase in sales.

2. All current asset accounts maintain the same percentage of sale as in year 2012.

3. For liability accounts, only accounts payable maintain the same percentage as in year 2012. Everything else remains constant.

4. In year 2012 we are using a payout ratio of 1/3, but for 2013 we use a payout ratio of 1/2.

5. We were using 60% of our full production capability last year (a little tricky. you need to figure out if we need to buy fixed assets or not).

Table 3 PRUFROCK CORPORATION 2012 Income Statement (S in millions) Sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable income $2,311 1,344 276 $ 691 141 $ 550 Table 3 (34%) 187 $ 363 Net income Dividends Addition to retained earnings $121 242 2012 $ 98 188 422 $ 708 Table 2 PRUFROCK CORPORATION 2011 and 2012 Balance Sheets (S in millions) Table 2 2011 Assets Current assets Cash $ 84 Accounts receivable 165 Inventory 393 Total $ 642 Fixed assets Net plant and equipment $2.731 Total assets $3,373 Liabilities and Owners' Equity Current liabilities Accounts payable $ 312 Notes payable 231 Total $ 543 Long-term debt $ 531 Owners' equity Common stock and paid-in surplus $ 500 Retained earnings 1.799 Total $2,299 Total liabilities and owners' equity $3,373 $2.880 $3,588 $ 344 196 $ 540 $ 457 $ 550 2.041 $2.591 $3,588 Table 3 PRUFROCK CORPORATION 2012 Income Statement (S in millions) Sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable income $2,311 1,344 276 $ 691 141 $ 550 Table 3 (34%) 187 $ 363 Net income Dividends Addition to retained earnings $121 242 2012 $ 98 188 422 $ 708 Table 2 PRUFROCK CORPORATION 2011 and 2012 Balance Sheets (S in millions) Table 2 2011 Assets Current assets Cash $ 84 Accounts receivable 165 Inventory 393 Total $ 642 Fixed assets Net plant and equipment $2.731 Total assets $3,373 Liabilities and Owners' Equity Current liabilities Accounts payable $ 312 Notes payable 231 Total $ 543 Long-term debt $ 531 Owners' equity Common stock and paid-in surplus $ 500 Retained earnings 1.799 Total $2,299 Total liabilities and owners' equity $3,373 $2.880 $3,588 $ 344 196 $ 540 $ 457 $ 550 2.041 $2.591 $3,588