Eagle Sports Supply has the following financial statements. Assume that Eagle\'s

Question

Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales INCOME STATEMENT, 2012 Sales Costs Interest laxes $900 170 50 120 Net income $560 BALANCE SHEET, YEAR-END 2011 2012 2011 2012 $ 900 $1,000 1,800 2,000 Assets $2,700 $3,000 Debt Equity Total $2,700 $3,000 Total $2,700 $3,000 a. Find Eagle's required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 20% in 2013" (Do not round intermediate calculations. Round your answer to 2 decimal places.) External fund 264 b-1 If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? Debt Interest Dividend:s b-2 What will its value be? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Value

Explanation / Answer

(a)New Net Income = 560 *1.2 = 672

Dividends = 50% = 50% 0f 672 = 336

Addition to Equity = 672-336 = 336

Balance Sheet

Assets = 3000 *1.2 = 3600

Debt = 1000

Equity = 2000 + 336 = 2336

External Funding = 3600 - 2336 - 1000 = 265

External fund = $264

(b1) If it chooses not to use Equity, the balancing item is Debt

(b2) New value = 1000 + 264 = $1,264

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