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.
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
Section: Chapter Questions
Problem 1PS
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Question
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 |
$ | 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 | ||||||
| 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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