The most recent financial statements for Retro Machine, Inc., follow. Sales for 2021 are projected to grow
Question:
The most recent financial statements for Retro Machine, Inc., follow. Sales for 2021 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what is the external financing needed to support the 20 percent growth rate in sales?
RETRO MACHINE INC.
2020 Income Statement
Sales ...............................................................$683,520
Costs ................................................................567,240
Other expenses ...............................................17,320
Earnings before interest and taxes ...........$ 98,960
Interest paid ....................................................15,780
Taxable income ...........................................$ 83,180
Taxes (21%) .....................................................17,468
Net income ..................................................$ 65,712
Dividends .....................................................$ 22,719
Addition to retained earnings ......................42,993
Step by Step Answer:
Corporate Finance Core Principles And Applications
ISBN: 9781260571127
6th Edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan