Question

Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the...

Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $7.7 million. The firm also has a profit margin of 20 percent, a retention ratio of 25 percent, and expects sales of $9.7 million next year. Fixed assets are currently fully utilized, and the nature of Wall-E’s fixed assets is such that they must be added in $1 million increments.

If current assets and current liabilities are expected to grow with sales, what amount of additional funds will Wall-E need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)

Additional Funds Needed $ ______________

Assets Liabilities and Equity
  Current assets $ 2,618,000 Current liabilities $ 2,233,000
  Fixed assets 4,928,000 Long-term debt 1,850,000
Equity 3,463,000
  Total assets $ 7,546,000 Total liabilities and equity $ 7,546,000


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