The most recent financial statements for Assouad, Inc., are shown here: Income Statement Balance Sheet Sales $ 10,900 Current assets $ 5,250 Current liabilities $ 3,225 Costs 7,750 Fixed assets 10,100 Long-term debt 4,750 Taxable income $ 3,150 Equity 7,375 Taxes (22%) 693 Total $ 15,350 Total $ 15,350 Net income $ 2,457 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 35 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are projected to increase by exactly 17 percent. What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)
| Sales(10900*1.17) | 12753 |
| Costs(7750*1.17) | 9067.5 |
| Taxable income | $3685.5 |
| Taxes($3685.5*22%) | 810.81 |
| Net income | $2874.69 |
| Less:dividends($2874.69*35%) | $1006.1415 |
| Addition to retained earnings | $1868.5485 |
Total assets would be=$15350*1.17=$17959.5
Total equity would be=$7375+Addition to retained earnings
=(7375+$1868.5485)=$9243.5485
Current liabilities would be=$3225*1.17=$3773.25
Total liabilities=Current liabilities+Long term debt
=$3773.25+4750=8523.25
Total assets=Total equity+Total liabilities
Hence external financing needed=$17959.5-(9243.5485+8523.25)
=$192.70(Approx).
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