Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales.

INCOME STATEMENT, 2015

Sales .................. $950

Costs .................. 250

Interest .................. 50

Taxes .................. 150

Net income .......... $500

a. Find Eagle's required external funds if it maintains a dividend payout ratio of 70% and plans a growth rate of 15% in 2016.
b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? What will its value be?
c. Now suppose that the firm plans instead to increase long-term debt only to $1,100 and does not wish to issue any new shares of stock. Why must the dividend payment now be the balancing item? What will its value be?

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BALANCE SHEET, YEAR-END 2014 2014 $ 900 1.800 2015 $1,000 2,000 $3,000 2015 Debt Equity Total Assets $2,700 2.700 $3.000 Total $2,700 $3,000