Question

# The most recent financial statements for Martin, Inc.,are shown here: Income Statement Balance Sheet   Sales \$...

 The most recent financial statements for Martin, Inc.,are shown here:
 Income Statement Balance Sheet Sales \$ 27,300 Assets \$ 117,000 Debt \$ 25,900 Costs 16,100 Equity 91,100 Taxable income \$ 11,200 Total \$ 117,000 Total \$ 117,000 Taxes (36%) 4,032 Net income \$ 7,168
 Assets and costs are proportional to sales. Debt and equity are not. A dividend of \$1,841.4 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be \$37,674. What external financing is needed? (Do not include the dollar sign (\$). Round your answer to to 2 decimal places. (e.g., 32.16))

proportionate increase in sales = (new sales - previous sales) / previous sales
=37674 - 27300) / 27300
=38%

As asset and cost are proportionate to sales hence our new Asset and cost will be

Cost = 16100 * 1.38 = 22218
Asset =111700*1.38 = 154146

 previous year next year sales 27300 37674 less cost 16100 22218 Taxable Income 11200 15456 less Tax 4032 5564.16 Net Income 7168 9891.84 Dividend 1841.4 2541.13 (N.I * payout ratio payout ratio 0.25689 (Dividend /Net Income) Retained earnings 7350.71 (net income - dividend)

New Equity = previous Equity + Retained earning
91100+7350.71
=98450.71

Debt = 25900

Asset = 154146

Financing needed = Asset - Total debt and equity
= 154146 - (98450.71+25900)
=29795.29

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