The most recent financial statements for Moose Tours, Inc., follow. Sales for 2014 are projected to grow by 15 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what is the external financing needed to support the 15 percent growth rate in sales?

Transcribed Image Text:

MOOSE TOURS, INC. 2013 Income Statement Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (35%) Net income $995,000 (782,000) (15,000) $198,000 (21,670) $176,330 (61,716) $114,615 $45,700 $68,915 Dividends Addition to retained earnings MOOSE TOURS, INC. Balance Sheet as of December 31, 2013 Assets Liabilities and owners' Equity Current assets Current liabilities Cash Accounts receivable Inventory 27,500 47,300 83,600 Accounts payable 71,500 9,900 81,400 $171,600 Notes payable Total Total 158,400 Long-term debt Owners' equity Fixed assets Net plant and equipment Common stock and paid-in surplus Retained earnings 23,100 282,700 305,800 $558,800 $400,400 Total Total assets 558 800 Total liabilities and owners' equity