The most recent financial statements for Fleury Inc., follow. Sales for 2015 are
ID: 2612192 • Letter: T
Question
The most recent financial statements for Fleury Inc., follow. Sales for 2015 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.
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? (Do not round intermediate calculations.)
The most recent financial statements for Fleury Inc., follow. Sales for 2015 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.
Explanation / Answer
Sales 946250 Costs 740000 others Expenses 16250 EBIT 190000 Interset 15000 Taxable Income 175000 Tax 35000 Net Income 140000 The payout ratio is constant, so the dividends paid this year is the payout ratio from last year times net income, o Dividend =(21920/109600)*140000 =28000 addition to retained earnings will be 140000-28000 =112000 The new retained earnings on the pro forma balance sheet will be New retained earnings=279720+112000 =391720 Asset Amount Liabilities and Owners’ Equity Amount Cash 21640*1.25 27050 Current liabilities Accounts receivable 33960*1.25 42450 Accounts payable 55800*1.25 69750 Inventory 88650 Notes payable 18000*1.25 18750 Total 158150 Total 88500 Fixed assets Long-term debt 140000 Net plant and equipment 612500 Owners’ equity amd paid-in surplus 126000 Retained earnings 391720 Total 517720 Total assets 770650 Total liabilities and owners’ equity 746220 Total assets 770650 Total liabilities and owners’ equity 746220 EFN 24430
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