The 2019 financial statements for Growth Industries are presented below.   INCOME STATEMENT, 2019 Sales       $ 230,000   Costs         210,000   EBIT       $ 110,000   Interest expense         22,000   Taxable income       $ 88,000   Taxes (at 21%)         18,840   Net income       $ 69,520   Dividends $ 34,760         Addition to retained earnings $ 34,760              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   39,000     Long-term debt   220,000   Total current assets $ 60,000     Stockholders’ equity       Net plant and equipment   260,000     Common stock plus additional paid-in capital   15,000             Retained earnings   70,000   Total assets $ 320,000     Total liabilities plus stockholders' equity $ 320,000        Sales and costs are projected to grow at 20% 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 0.50. What is the required external financing over the next year? (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
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The 2019 financial statements for Growth Industries are presented below.

 

INCOME STATEMENT, 2019
Sales       $ 230,000  
Costs         210,000  
EBIT       $ 110,000  
Interest expense         22,000  
Taxable income       $ 88,000  
Taxes (at 21%)         18,840  
Net income       $ 69,520  
Dividends $ 34,760        
Addition to retained earnings $ 34,760        
 

  

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   39,000     Long-term debt   220,000  
Total current assets $ 60,000     Stockholders’ equity      
Net plant and equipment   260,000     Common stock plus additional paid-in capital   15,000  
          Retained earnings   70,000  
Total assets $ 320,000     Total liabilities plus stockholders' equity $ 320,000  
 

  

Sales and costs are projected to grow at 20% 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 0.50.

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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