685 170 202 $ 343 Hungry Kids 2012 Balance Sheet 960 3,150 6,700 $ 8,200 $ 8,200
ID: 2761444 • Letter: 6
Question
685
170
202
$
343
Hungry Kids
2012 Balance Sheet
960
3,150
6,700
$
8,200
$
8,200
Hungry Kids is currently operating at full capacity (Hint: Thus all assets are spontaneous). The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 5 percent. What is the external financing need?
$69
$67
$68
$50
$49
Hungry Kids2012 Income Statement Net sales $ 4,700 Cost of goods sold 3,300 Depreciation
685
Earnings before interest and taxes $ 715 Interest paid170
Taxable Income $ 545 Taxes202
Net income$
343
Dividends $ 66 Addition to retained earnings $ 277Explanation / Answer
Newsales = 4700(1+.05) = 4935
EFN = A0/S0[S1-S0] - L0/S0[S1-S0] - [Net income /S0]*S1*[Addition to RE/Net income]
= 8200/4700 [4935-4700] - 1380/4700[4935-4700] - [343/4700]*4935 *[277/343]
= 410 - 69- 291
= 50
correct option is "C"
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