Question

The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected...

The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. MOOSE TOURS, INC. 2015 Income Statement   Sales $ 759,000   Costs 594,000   Other expenses 15,000   Earnings before interest and taxes $ 150,000   Interest expense 16,000   Taxable income $ 134,000   Taxes (30%) 40,200   Net income $ 93,800         Dividends $ 28,140     Addition to retained earnings 65,660    MOOSE TOURS, INC. Balance Sheet as of December 31, 2015 Assets Liabilities and Owners’ Equity   Current assets   Current liabilities     Cash $ 21,840     Accounts payable $ 56,000     Accounts receivable 34,160     Notes payable 15,200     Inventory 71,120       Total $ 71,200       Total $ 127,120   Long-term debt $ 142,000   Fixed assets   Owners’ equity     Net plant and equipment $ 363,000     Common stock and paid-in surplus $ 128,000     Retained earnings 148,920       Total $ 276,920   Total assets $ 490,120   Total liabilities and owners’ equity $ 490,120 If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 20 percent growth rate in sales? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Homework Answers

Answer #1
Sales 910800
Costs 712800
Other expenses 18000
Earnings before interest and taxes 180000
Interest paid 16000
Taxable Income 164000
Taxes 57400
Net income 106600
Dividend30%*106600 31980
Addition to retained earnings 74620
Dividend Payout ratio =28140/93800 =30% 0.30
Liabilities and Owners' Equity Asset
Current liabilities Current assets
Accounts payable 67200 Cash 26208
Notes payable 15200 Accounts receivable 40992
Inventory 86544
Total Current liabilities 82400 Total Current Asset 153744
Long-term debt 142000 Fixed assets
Owners' equity Net plant and equipment 363000
Common stock and paid-in surplus 128000
Retained earnings 223540
Total Owners' equity 351540
Total liabilities and owners' equity 575940 Total 516744
EFN =516744-575940 -59196
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