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
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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 | ||||
| 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?
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