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Homework answers / question archive / The 2019 financial statements for Growth Industries are presented below
The 2019 financial statements for Growth Industries are presented below.
INCOME STATEMENT, 2019Sales $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 retained earnings$53,088
BALANCE SHEET, YEAR-END, 2019 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 Stockholders' equity 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?
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