Sales and costs are projected to grow at 30% a year for at least the...
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Sales and costs are projected to grow at 30% 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 75% 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 0.50. What is the required external financing over the next year? External Financing:
The 2017 financial statements for Growth Industries are presented belovw INCOME STATEMENT, 2017 Sales Costs EBIT Interest expense Taxable income Taxes (at 35%) Net income $400,000 250,000 150,000 30,000 120,000 42,000 $78,000 Dividends Addition to retained earnings $39,000 39,000
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Sales and costs are projected to grow at 30% 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 75% 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 0.50. What is the required external financing over the next year? External Financing: