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3. Hogan Inc. generated EBIT of $240,000 this past year using assets of S1,100,000. The interest rate on its existing long-term debt of S640,000 is 12.5 percent and the firm's tax rate is 40 percent. The firm paid a dividend of $1.27 on each of its 37,800 shares outstanding from net income of $96,000. The total book value of equity is $446,364 of which the common stock account equals $335,000. The firm's shares sell for $28.00 per share in the market. The firm forecasts a 10% increase in sales, assets, and EBIT next year, and a di $1.40 per share. If the fi m needs additional capital funds it will raise 60% with debt and 40% with equity. The cost ofany new debt will be 13%. Spontaneous liabilities are estimated at $15,000 spontaneous liabilities, the firm uses no other sources o cumulative AFN Hogan will need to balance its projected balance sheet using the projected balance sheet method through the first two passes? vidend of for next year, representing an increase of 10% over this year. Except for f current liabilities and will continue this policy in the future. What will be the First Pass Last Year $ 240,000 80 ,000 $160 C00 Factor Feedback Second Pass BIT Interest BT 80,o0o 84,000 ,600 1o,400 52,920 5% 480 Taxes Div. dition to RE $ %.coo 48 000 $47, 994 tal assets $ 1,100,00o. ,210, 000 13,636 .% 640,000 335,000 $ ruals&AP g-term debt ck ined Earninas IS,obo 640,000 35.000 216, 838

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