Answer the second question

Major Manuscripts, Inc. 2009 Income Statement Net sales 7.700 Cost of goods sold 6,665 Depreciation 200 Earnings before interest and 835 taxes Interest paid 20 Taxable income 815 Taxes 284 Net income 531 Dividends 239 Cash Accounts rec Inventory Total Net fixed assets Total assets Major Manuscripts, Inc. 2009 Balance Sheet 2009 2.200 Accounts payable 870 Long-term debt 2.300 Common stock 5,370 Retained earnings 3.260 8.630 Total abilities & equity 2009 1.750 270 2.400 4.210 Major Manuscripts, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent? HINT: Start by calculating the growth in assets. Now we need to figure out how we will pay for the growth. Start by subtracting off from that needed amount of new assets the estimated growth in internal equity (that it, the new retained earnings that will be used to purchase some of those new assets). Since current liabilities also grow proportional to sales in this problem, also subtract off the estimated growth in current liabilities (used to finance the purchase of current assets). Whatever amount is left over is what we must raise in new, long-term debt. Multiple Choice 367 314 637 29 297 The most recent financial statements for Live Co. are shown here: Balance Sheet $23,719 Debt $23,377 Income Statement Current Sales $11,000 assets Fixed Costs 6,600 -assets Taxable $4,400 Total income Taxes (33%) 1,452 Net income $2,948 16,598 Equity 16,940 $40,317 Total $40,317 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 36 percent dividend payout ratio. What is the fastest the company could grow while keeping the current debt-equity ratio constant and without issuing new shares? (Do not round your intermediate calculations.) HINT: You must know the difference between IGR and SGR. Multiple Choice 4.91 % 12.53 % O 12.03 % 13.03% 6.68 Major Manuscripts, Inc. 2009 Income Statement Net sales 7.700 Cost of goods sold 6,665 Depreciation 200 Earnings before interest and 835 taxes Interest paid 20 Taxable income 815 Taxes 284 Net income 531 Dividends 239 Cash Accounts rec Inventory Total Net fixed assets Total assets Major Manuscripts, Inc. 2009 Balance Sheet 2009 2.200 Accounts payable 870 Long-term debt 2.300 Common stock 5,370 Retained earnings 3.260 8.630 Total abilities & equity 2009 1.750 270 2.400 4.210 Major Manuscripts, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with sales. The tax rate and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10 percent? HINT: Start by calculating the growth in assets. Now we need to figure out how we will pay for the growth. Start by subtracting off from that needed amount of new assets the estimated growth in internal equity (that it, the new retained earnings that will be used to purchase some of those new assets). Since current liabilities also grow proportional to sales in this problem, also subtract off the estimated growth in current liabilities (used to finance the purchase of current assets). Whatever amount is left over is what we must raise in new, long-term debt. Multiple Choice 367 314 637 29 297 The most recent financial statements for Live Co. are shown here: Balance Sheet $23,719 Debt $23,377 Income Statement Current Sales $11,000 assets Fixed Costs 6,600 -assets Taxable $4,400 Total income Taxes (33%) 1,452 Net income $2,948 16,598 Equity 16,940 $40,317 Total $40,317 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 36 percent dividend payout ratio. What is the fastest the company could grow while keeping the current debt-equity ratio constant and without issuing new shares? (Do not round your intermediate calculations.) HINT: You must know the difference between IGR and SGR. Multiple Choice 4.91 % 12.53 % O 12.03 % 13.03% 6.68