These are your financial statements for the year ending today. BALANCE SHEET Cash $180,000 Accounts Payable $
Question:
- These are your financial statements for the year ending today.
- BALANCE SHEET
Cash $180,000 Accounts Payable $ 360,000
Receivables 360,000 Accruals 180,000
Inventories 720,000 Notes Payable 156,000
Total Current Assets $1,260,000 Total Current Liabilities $ 696,000
Net Fixed Assets 1,440,000 Common Stock 1,800,000
Retained Earnings 204,000
Total Assets $2,700,000 Total Liabilities and Equity $2,700,000
INCOME STATEMENT
Sales $3,600,000
Less: Operating Costs 3,279,720
EBIT $ 320,280
Less: Interest 18,280
EBT $ 302,000
Less: Taxes (40%) 120,800
Net Income $ 181,200
Less: Dividends 108,000
Additions to Retained Earnings $ 73,200
You expect sales to increase 20% next year. Assume you are currently operating at 90% capacity, interest expense will be 13% of any interest-bearing debt balance at the beginning of the year, and dividends will grow by 3%. Using a pro forma income statement to estimate the additions to retained earnings, how much external funds do you project needing to support the 20% sales growth? Please explain how you arrived at your answer, any assumptions you made and what you perceive to be any limitations of your answer.
Expert Answer:
All financials are in Please see the second column to understand the mathematics Parameter Linkage S... View the full answer
