Question

The most recent financial statements for Xporter, Inc., are shown here: Income Statement Sales $7272 Costs $5543 Taxable Income ? Taxes (34%) ? Net Income ? Balance Sheet Current Asset $3922 Current Liabilities $2359 Fixed Asset $9835 Long Term Debt $3897 Equity ? Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 15 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are projected to increase by exactly 15 percent. What is the external financing needed?

Answer 1

Ans:

Sales(7272*1.15)	$8362.80
Costs(5543*1.15)	($6374.45)
Taxable income	1988.35
Taxes@34%	676.04
Net income	1312.31
Less:Dividends@15%	196.85
Addition to retained earnings	$1115.46

Total assets would be=($3922+$9835)*1.15)=$15,820.55

Total current liabilities=(2359*1.15)=2712.85

Total liabilities would be=(2712.85+3897)=6609.85

Equity=Total assets-total debt-current liabilities=13,757-3897-2359

Total liabilities and equity=$6609.85+(7501+1115.46)=$15226.31

Hence Total assets=Total liabilities and equity

Hence external financing needed=($15,820.55-$15226.31)

=$594.24