The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales $ 310,000 Costs 205,000 EBIT $ 105,000 Interest expense 21,000 Taxable income $ 84,000 Taxes (at 21%) 17,640 Net income $ 66,360 Dividends $ 26,544 Addition to retained earnings $ 39,816 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Cash $ 7,000 Accounts payable $ 14,000 Accounts receivable 12,000 Total current liabilities $ 14,000 Inventories 31,000 Long-term debt 210,000 Total current assets $ 50,000 Stockholders’ equity Net plant and equipment 250,000 Common stock plus additional paid-in capital 15,000 Retained earnings 61,000 Total assets $ 300,000 Total liabilities plus stockholders' equity $ 300,000 Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 70% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.40. What is the required external financing over the next year? Note: Enter excess cash as a negative number with a minus sign.
The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales $ 310,000 Costs 205,000 EBIT $ 105,000 Interest expense 21,000 Taxable income $ 84,000 Taxes (at 21%) 17,640 Net income $ 66,360 Dividends $ 26,544 Addition to retained earnings $ 39,816 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Cash $ 7,000 Accounts payable $ 14,000 Accounts receivable 12,000 Total current liabilities $ 14,000 Inventories 31,000 Long-term debt 210,000 Total current assets $ 50,000 Stockholders’ equity Net plant and equipment 250,000 Common stock plus additional paid-in capital 15,000 Retained earnings 61,000 Total assets $ 300,000 Total liabilities plus stockholders' equity $ 300,000 Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 70% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.40. What is the required external financing over the next year? Note: Enter excess cash as a negative number with a minus sign.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
The 2019 financial statements for Growth Industries are presented below.
| INCOME STATEMENT, 2019 | ||
| Sales | $ 310,000 | |
|---|---|---|
| Costs | 205,000 | |
| EBIT | $ 105,000 | |
| Interest expense | 21,000 | |
| Taxable income | $ 84,000 | |
| Taxes (at 21%) | 17,640 | |
| Net income | $ 66,360 | |
| Dividends | $ 26,544 | |
| Addition to |
$ 39,816 |
| Assets | Liabilities | ||
|---|---|---|---|
| Current assets | Current liabilities | ||
| Cash | $ 7,000 | Accounts payable | $ 14,000 |
| Accounts receivable | 12,000 | Total current liabilities | $ 14,000 |
| Inventories | 31,000 | Long-term debt | 210,000 |
| Total current assets | $ 50,000 | ||
| Net plant and equipment | 250,000 | Common stock plus additional paid-in capital | 15,000 |
| Retained earnings | 61,000 | ||
| Total assets | $ 300,000 | Total liabilities plus stockholders' equity | $ 300,000 |
Sales and costs are projected to grow at 40% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 70% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.40.
What is the required external financing over the next year?
Note: Enter excess cash as a negative number with a minus sign.
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