Rondolo, Inc. is currently operating at maximum capacity. All costs, assets, and current liabilities vary directly with
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Rondolo, 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.
Rondolo, Inc. 2015 Income Statement ($ in millions)
Net Sales $12,800
Less: Cost of Goods Sold 10,400
Depreciation 680
Earnings Before Interest and Taxes 1,720
Less: Interest Paid 280
Taxable Income $1,440
Taxes 500
Net Income $940
Dividends $423
Additions to retained earnings $517
Rondolo, Inc. 2015 Balance Sheet ($ in millions)
Cash $520
Accounts payable $1,810
Accounts rec 1,080
Long-term debt 3,600
Inventory 3,120
Common stock 5,000
Total $4,720
Retained earnings 1,790
Net fixed assets 7,480
Total assets $12,200
Total liabilities & equity $12,200
How much additional debt is required if no new equity is raised and sales are projected to increase by 4% ($ in millions)?
Expert Answer:
To calculate the additional debt required if sales are projected to increase by 4 you can use the pe... View the full answer
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