Assume costs and assets increase at the same rate as sales. Also assume 40% of net...

 

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Assume costs and assets increase at the same rate as sales. Also assume 40% of net income is paid out in dividends, the current debt to equity ratio is optimal, and that no new equity sales are possible. Forecast the addition to retained earnings assuming the firm's sales increase at the maximum percent possible given these assumptions. Current Assets Net Fixed A. Total Assets $100 $200 $300 Accts. Pay. Long term debt Equity Total L&E Net Income $50 $100 $150 $300 $132 Sales Costs Taxable income Taxes $1,000 $800 $200 $68 Assume costs and assets increase at the same rate as sales. Also assume 40% of net income is paid out in dividends, the current debt to equity ratio is optimal, and that no new equity sales are possible. Forecast the addition to retained earnings assuming the firm's sales increase at the maximum percent possible given these assumptions. Current Assets Net Fixed A. Total Assets $100 $200 $300 Accts. Pay. Long term debt Equity Total L&E Net Income $50 $100 $150 $300 $132 Sales Costs Taxable income Taxes $1,000 $800 $200 $68

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