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? (Enter excess cash as a negative number with a minus sign.)

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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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? (Enter excess cash as a negative number with a minus sign.)

 

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