Table 29.15 summarizes the 2019 income statement and endyear balance sheet of Drake?s Bowling Alleys. Drake?s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at .40. Interest is forecasted at 5% of debt at the start of the year.

a. What is the implied level of assets at the end of 2020?

b. If the company pays out 50% of net income as dividends, how much cash will Drake need to raise in the capital markets in 2020?

c. If Drake is unwilling to make an equity issue, what will be the debt ratio at the end of 2020?

Table 29.15

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Income Statement Sales $1,000 (40% of average assets)a (75% of sales) Costs 750 (5% of debt at start of year) Interest 25 Pretax profit 225 Тах 90 (40% of pretax profit) $135 Net income Balance Sheet $2,600 Debt $500 Net assets Equity 2,100 $2,600 Total $2,600 Total