- What is the maximum growth rate the company can expand at without external financing? The companys dividends payout ratio is 25%.
- What is the sustainable growth rate of the company? The companys dividends payout ratio is 25%.
- Calculate the External Funds Needed (EFN) to finance the growth in 2020?
- Investors would like to see the company sales grow at 25% in 2020. What would be the EFN required for this growth. Would you recommend a 25% sales growth? Why or why not?
Table 1. Balance Sheets 2020 2019 2018 Assets Cash Accounts receivable Inventories Total current assets Gross fixed assets Less accumulated depreciation Net fixed assets Total assets $ 85,632 878,000 1.716.480 $ 2,680,112 1,197,160 380.120 $ 817.040 $ 3.497.152 $ 7,282 632,160 1.287.360 $ 1,926,802 1,202,950 263.160 $ 939.790 $_2.866.592 $ 57,600 351,200 715.200 $ 1,124,000 491,000 146,200 $ 344.800 $ 1.468.800 Liabilities and Equity Accounts payable 436,800 Notes payable 300,000 Accruals 408.000 Total current liabilities $ 1,144,800 Long-term debt 400,000 Common stock 1,721,176 Retained earnings 231.176 Total equity $ 1952.352 Total liabilities and equity $3.497.152 Note: "E" indicates estimated. The 2020 data are forecasts. $ 524,160 636,808 489.600 $ 1,650,568 723,432 460,000 32.592 492.592 $2.866.592 $ 145,600 200,000 136.000 $ 481,600 323,432 460,000 203.768 $ 663.768 $1.468.800 Table 2. Income Statements 2020E 2019 $ 7,035,600 $ 6,034,000 5,875,992 5,528,000 550,000 _ 519,988 2018 $ 3,432,000 2,864,000 358,672 Sales Cost of goods sold Other expenses Total operating costs excluding depreciation EBITDA Depreciation EBIT Interest expense EBT Taxes (40%) Net income $ 6,425,992 $ 609,608 116,960 $ 492,648 70,008 $ 422,640 169,056 $ 253.584 $ 6,047,988 ($ 13,988) 116,960 ($ 130,948) 136,012 ($ 266,960) - (106,784) ($ 160.176) $ 3,222,672 $ 209,328 - 18.900 $ 190,428 43,828 $ 146,600 - 58,640 87.960 EPS 1.014 ($ 1.602) $ DPS 0.220 $ 0.110 $ Book value per share 7.809 $ 4.926 $ Stock price 12.17 $ 2.25 Shares outstanding 250,000 100,000 Tax rate 40.00% 40.00% Lease payments 40,000 40,000 Sinking fund payments Note: "E" indicates estimated. The 2020 data are forecasts. The firm had sufficient taxable income in 2017 and 2018 to obtain its full tax refund in 2019. 0.880 0.220 6.638 8.50 100,000 40.00% 40,000 TABLE 4. Statement of Stockholders' Equity, 2019 Common Stock Shares Amount 100,000 $460,000 Retained Earnings $203,768 (160,176) (11,000 Total Stockholders' Equity $663,768 Balances, 12/31/18 2019 Net Income Cash Dividends Addition (Subtraction) to Retained Earnings Balances, 12/31/19 (171,176) (171,176) 100.000 $460.000 Table 5. Statement of Cash Flows, 2019 ($ Operating Activities Net income Depreciation and amortization Increase in accounts payable Increase in accruals Increase in accounts receivable Increase in inventories Net cash provided by operating activities 160,176) 116,960 378,560 353,600 (280,960) (572,160) 164,176) $ Long-Term Investing Activities Additions to property, plant, and equipment Net cash used in investing activities $ 711,950) ($711,950) $ Financing Activities Increase in notes payable Increase in long-term debt Payment of cash dividends Net cash provided by financing activities 436,808 400,000 (11,000) 825,808 $ ($ Summary Net decrease in cash Cash at beginning of year Cash at end of year 50,318) 57,600 7,282 $
