Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,200 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $33,000. What is the external financing needed? Income Statement Balance SheetSales 30,000 Assets 56,100 Debt 20,500Costs 22,000 Equity 35,600Taxable Income 8,000 Total 56,100 Total 56,100Taxes (40%) 3200 Net Income 4800

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Business

Leonardo Cantrell

12 July, 21:09

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,200 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $33,000. What is the external financing needed? Income Statement Balance SheetSales 30,000 Assets 56,100 Debt 20,500Costs 22,000 Equity 35,600Taxable Income 8,000 Total 56,100 Total 56,100Taxes (40%) 3200 Net Income 4800

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Kristian · Answer 1

An increase of sales to $33000: (33000 - 30000) / 30000 = 10%

Sales 33000

Cost (22000 + 10% of 22000) (24200)

EBIT 8800

Tax 40% 3520

Net Income 5280

Assets (56100+10% of 56100) 61710

Total 58960

Debt 20500

Equity 38460

Total 61710

External financing needed is the difference between Assets and Liabilities+Equity, which is 61710 - 58960 = 2750