The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Income Statement Sales Costs Pretax income Taxes (at 30.0%) Net income 2019 Net assets $4,000 Total $4,000 External funds needed Value of debt $1,950 750 $1,200 360 $ 840 Dividends Balance Sheet, Year-End 2018 $ 3,700 Debt Equity Total a. Find Eagle's required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 25% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant. (Do not round intermediate calculations. Round your answe to the nearest whole dollar amount.) $ 3,700 $ 2019 $1,500 2,500 $4,000 264 b. If Eagle chooses not to issue new shares of stock, what is the value of debt in 2020? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) $ 1,264 2018 $ 1,400 2,300 $ 3,700 c. Suppose that the firm plans instead to increase long-term debt only to $1,850 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that Eagle's assets are proportional to its sales. Income Statement Sales Costs Pretax income Taxes (at 30.0%) Net income 2019 Net assets $4,000 Total $4,000 External funds needed Value of debt $1,950 750 $1,200 360 $ 840 Dividends Balance Sheet, Year-End 2018 $ 3,700 Debt Equity Total a. Find Eagle's required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 25% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant. (Do not round intermediate calculations. Round your answe to the nearest whole dollar amount.) $ 3,700 $ 2019 $1,500 2,500 $4,000 264 b. If Eagle chooses not to issue new shares of stock, what is the value of debt in 2020? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) $ 1,264 2018 $ 1,400 2,300 $ 3,700 c. Suppose that the firm plans instead to increase long-term debt only to $1,850 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)
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
Ee 472.
Transcribed Image Text:The financial statements of Eagle Sport Supply are shown in the table below. For simplicity, "Costs" include interest. Assume that
Eagle's assets are proportional to its sales.
Income Statement
Sales
Costs
Pretax income
Taxes (at 30.0%)
Net income
2019
Net assets $4,000
Total
$ 4,000
External funds needed
Value of debt
$1,950
750
$1,200
360
840
Dividends
Balance Sheet, Year-End
Debt
Equity
Total
a. Find Eagle's required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 25% in revenue,
expenses, and assets in 2020. Assume the tax rate remains constant. (Do not round intermediate calculations. Round your answer
to the nearest whole dollar amount.)
$
2018
$ 3,700
$ 3,700
$
b. If Eagle chooses not to issue new shares of stock, what is the value of debt in 2020? (Do not round intermediate calculations.
Round your answer to the nearest whole dollar amount.)
1,264
2019
$ 1,500
2,500
$ 4,000 $ 3,700
2018
$1,400
2,300
264
c. Suppose that the firm plans instead to increase long-term debt only to $1,850 and does not wish to issue any new shares of stock.
What must be the 2020 dividend payment now? (Do not round intermediate calculations. Round your answer to the nearest whole
dollar amount.)
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