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 25 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 $ 753,000
  Costs 588,000
  Other expenses 24,000
  Earnings before interest and taxes $ 141,000
  Interest expense 10,000
  Taxable income $ 131,000
  Taxes (40%) 52,400
  Net income $ 78,600
   
    Dividends $ 31,440
    Addition to retained earnings 47,160

  

MOOSE TOURS, INC.
Balance Sheet as of December 31, 2015
Assets Liabilities and Owners’ Equity
  Current assets   Current liabilities
    Cash $ 21,240     Accounts payable $ 55,400
    Accounts receivable 33,560     Notes payable 14,600
    Inventory 70,520
      Total $ 70,000
      Total $ 125,320   Long-term debt $ 101,000
  Fixed assets   Owners’ equity
    Net plant and equipment $ 210,000     Common stock and paid-in surplus $ 100,000
    Retained earnings 64,320
      Total $ 164,320
  Total assets $ 335,320   Total liabilities and owners’ equity $ 335,320

If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 25 percent growth rate in sales?

Homework Answers

Answer #2

Solution:

2,015.00 2016 25% increase in sales

Sales 7,53,000.00 9,41,250.00

Costs 5,88,000.00 7,35,000.00

Other Expenses 24,000.00 30,000.00

EBIT 1,41,000 1,76,250.00

Interest Expense 10,000.00 10,000.00

Taxable Income 1,31,000.00 1,66,250.00

Taxes 52,400.00 66,500.00

Net Income 78,600.00 99,750.00

Divdend 31,440.00 39,900.00

To Retained Earnings 47,160.00 59,850.00

Current Assets 1,25,320.00 1,56,650.00

Fixed Assets 2,10,000.00 2,62,500.00

Total 3,35,320.00 4,19,150.00

Current Liabilities -70,000.00 -90,000.00

Longterm Debt -1,01,000.00 -1,01,000.00

Share capital -1,00,000.00 1,00,000.00

Retained Earnings 64,320.00 1,24,170.00

Total -4,15,170.00

Difference 3,980.00

External Financing needed 3,980.00

answered by: anonymous
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