The 2019 financial statements for Growth Industries are presented below. INCOME STATEMENT, 2019 Sales $ 370,000 Costs 235,000 EBIT $ 135,000 Interest expense 27,000 Taxable income $ 108,000 Taxes (at 21%) 22,680 Net income $ 85,320 Dividends $ 51,192 Addition to retained earnings $ 34,128 BALANCE SHEET, YEAR-END, 2019 Assets Liabilities Current assets Current liabilities Cash $ 6,000 Accounts payable $ 13,000 Accounts receivable 11,000 Total current liabilities $ 13,000 Inventories 33,000 Long-term debt 270,000 Total current assets $ 50,000 Stockholders’ equity Net plant and equipment 310,000 Common stock plus additional paid-in capital 15,000 Retained earnings 62,000 Total assets $ 360,000 Total liabilities plus stockholders' equity $ 360,000 Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 75% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 19SP

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The 2019 financial statements for Growth Industries are presented below.

INCOME STATEMENT, 2019
Sales			$	370,000
Costs				235,000
EBIT			$	135,000
Interest expense				27,000
Taxable income			$	108,000
Taxes (at 21%)				22,680
Net income			$	85,320
Dividends	$	51,192
Addition to retained earnings	$	34,128

BALANCE SHEET, YEAR-END, 2019
Assets			Liabilities
Current assets			Current liabilities
Cash	$	6,000	Accounts payable	$	13,000
Accounts receivable		11,000	Total current liabilities	$	13,000
Inventories		33,000	Long-term debt		270,000
Total current assets	$	50,000	Stockholders’ equity
Net plant and equipment		310,000	Common stock plus additional paid-in capital		15,000
			Retained earnings		62,000
Total assets	$	360,000	Total liabilities plus stockholders' equity	$	360,000

Sales and costs are projected to grow at 20% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 75% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.60.

What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)

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