The most recent financial statements for your company are as follows. Sales for 2018 are projected to grow by 20%. Interest expense will remain constant; the Tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at only 80% capacity, and no new debt or equity is issued, what is the external financing needed to support the growth rate in sales? Income Statement 2017 Sales $800,000 Costs 650,000 Other expenses 19,000 Ebit 131,000 Interest paid 15,000 Taxable income 116,000 Taxes (35%) 40,600 Net income 75,400 Dividend 33,000 Add to RE 42,400 Assets Current assets Cash Acc. Receivables Inventory Total Balance Sheet 2017 Liabilities and Equity Current liabilities 25,300 Acc payable 50,000 Notes payable 86,900 Total 162,200 Long term debt Owners’ Equity 413,000 Comm. Stock 68,000 17,000 85,000 158,000 Fixed assets Net plant & equip. RE 140,000 192,200 332,200 575,200 Total 575,200 Total liability and equity Total assets
