ezto.mheducation.com ch 4 problems try slue: 0.00 points Owen\'s Electronics has

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ezto.mheducation.com ch 4 problems try slue: 0.00 points Owen's Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future assets (including foxed assets) and current liabilities will vary directly with sales. The firm is working at full capacity. Balance Sheet (in $ millions) Assets Liabilities and Stockholders' Equity S 10 Accounts payable s 21 22 Accrued wages 27 Accrued taxes 59 Current liabilites 47 Notes payable Accounts receivable 12 41 17 21 27 s 106 Current assets Fixed assets Common stock Retained earnings Total liabilities and stockholders' equity $106 Total assets Owen's has an aftertax profit margin of 8 percent and a dividend payout ratio of 50 percent If sales grow by 25 percent next year, determine how many dollars of new funds are needed to finance the growth. (Do na calculations. Enter your answer in dollars, not millions, (e.g. $1,234,567)) New funds Hints References Book & Resources Hint#1 Check my work

Explanation / Answer

New Funds $        11,250,000 Working: a. increase in assets = Existing assets *%change in assets = $      106,000,000 * 25% = $        26,500,000 b. Increase in current liabilities = $        41,000,000 * 25% $        10,250,000 c. retained earning = Increased sales x After tax profit margin*Retention ratio = $      100,000,000 x 125% x 8% x (1-0.50) = $ 5,000,000 d. New Funds needed = increase in assets - Increase in current liabilities - retained earning = $        26,500,000 - $ 10,250,000 - $ 5,000,000 = $        11,250,000

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