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 | $ | 340,000 | ||||
| Costs | 220,000 | |||||
| EBIT | $ | 120,000 | ||||
| Interest expense | 24,000 | |||||
| Taxable income | $ | 96,000 | ||||
| Taxes (at 21%) | 20,160 | |||||
| Net income | $ | 75,840 | ||||
| Dividends | $ | 22,752 | ||||
| Addition to |
$ | 53,088 | ||||
| Assets | Liabilities | |||||||
| Current assets | Current liabilities | |||||||
| Cash | $ | 3,000 | Accounts payable | $ | 10,000 | |||
| Accounts receivable | 8,000 | Total current liabilities | $ | 10,000 | ||||
| Inventories | 29,000 | Long-term debt | 240,000 | |||||
| Total current assets | $ | 40,000 | ||||||
| Net plant and equipment | 280,000 | Common stock plus additional paid-in capital | 15,000 | |||||
| Retained earnings | 55,000 | |||||||
| Total assets | $ | 320,000 | Total liabilities plus stockholders' equity | $ | 320,000 | |||
Sales and costs are projected to grow at 40% 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 70% 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 0.30.
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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