A company has the following information for the current year: Current assets $42
ID: 2783980 • Letter: A
Question
A company has the following information for the current year:
Current assets
$42,500
Current liabilities
$24,650
Noncurrent assets
224,000
Noncurrent liabilities
173,200
Total assets
$266,500
Retained earnings
19,475
All other equity
49,175
Total liabilities and equity
$266,500
Sales revenue is forecasted to grow by 12% next year, forecasted net income is expected to be $30,000, and all current assets and current liabilities vary proportionally with sales. If $45,000 worth of net noncurrent assets are required to be purchased next year, what is the external financing needed? Assume that the company does not pay dividends, and that all noncurrent liabilities and equity (except retained earnings) will be the same level as the current year.
$16,785
$16,964
$17,142
$17,321
$17,499
Current assets
$42,500
Current liabilities
$24,650
Noncurrent assets
224,000
Noncurrent liabilities
173,200
Total assets
$266,500
Retained earnings
19,475
All other equity
49,175
Total liabilities and equity
$266,500
Explanation / Answer
EFN = Assets - Current Liabilites - Earnings Retained
= Current Assets x g + Increase in non-current asset - Current Liabilities x g - Net Income x Retention Ratio
= 42,500 x 13% + 45,000 - 24,650 x 13% - 30,000 x 100%
= $17,321
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.