Eagle Sports Supply has the following financial statements. Assume that Eagle?s assets are proportional to its sales.
Question:
Eagle Sports Supply has the following financial statements. Assume that Eagle?s assets are proportional to its sales.
INCOME STATEMENT, 2019Sales..............................$950Costs...............................250Interest..............................50Taxes...............................150Net 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 2020.
b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item?
c. What will be the value of this balancing item?
d. 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. What is now the balancing item?
e. What will be the value of this new balancing item?
DividendA dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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Fundamentals of Corporate Finance
ISBN: 978-1260566093
10th edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus