The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales $ 390,000 Costs 245,000 EBIT $ 145,000 Interest expense 29,000 Taxable income $ 116,000 Taxes (at 21%) 24,360 Net income $ 91,640 Dividends $ 36,656 Addition to retained earnings $ 54,984 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Cash $ 8,000 Accounts payable $ 15,000 Accounts receivable 13,000 Total current liabilities $ 15,000 Inventories 29,000 Long-term debt 290,000 Total current assets $ 50,000 Stockholders’ equity Net plant and equipment 330,000 Common stock plus additional paid-in capital 15,000 Retained earnings 60,000 Total assets $ 380,000 Total liabilities plus stockholders' equity $ 380,000 Sales and costs are projected to grow at 30% 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 75% 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?
The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales $ 390,000 Costs 245,000 EBIT $ 145,000 Interest expense 29,000 Taxable income $ 116,000 Taxes (at 21%) 24,360 Net income $ 91,640 Dividends $ 36,656 Addition to retained earnings $ 54,984 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Cash $ 8,000 Accounts payable $ 15,000 Accounts receivable 13,000 Total current liabilities $ 15,000 Inventories 29,000 Long-term debt 290,000 Total current assets $ 50,000 Stockholders’ equity Net plant and equipment 330,000 Common stock plus additional paid-in capital 15,000 Retained earnings 60,000 Total assets $ 380,000 Total liabilities plus stockholders' equity $ 380,000 Sales and costs are projected to grow at 30% 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 75% 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?
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
Related questions
Question
The 2019 financial statements for Growth Industries are presented below.
INCOME STATEMENT, 2019 | ||||||
Sales | $ | 390,000 | ||||
Costs | 245,000 | |||||
EBIT | $ | 145,000 | ||||
Interest expense | 29,000 | |||||
Taxable income | $ | 116,000 | ||||
Taxes (at 21%) | 24,360 | |||||
Net income | $ | 91,640 | ||||
Dividends | $ | 36,656 | ||||
Addition to |
$ | 54,984 | ||||
BALANCE SHEET, YEAR-END, 2019 | ||||||||
Assets | Liabilities | |||||||
Current assets | Current liabilities | |||||||
Cash | $ | 8,000 | Accounts payable | $ | 15,000 | |||
Accounts receivable | 13,000 | Total current liabilities | $ | 15,000 | ||||
Inventories | 29,000 | Long-term debt | 290,000 | |||||
Total current assets | $ | 50,000 | ||||||
Net plant and equipment | 330,000 | Common stock plus additional paid-in capital | 15,000 | |||||
Retained earnings | 60,000 | |||||||
Total assets | $ | 380,000 | Total liabilities plus stockholders' equity | $ | 380,000 | |||
Sales and costs are projected to grow at 30% 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 75% 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?
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education