Wagner Industrial Motors, which is currently operating at full capacity, has sal

Question

Wagner Industrial Motors, which is currently operating at full capacity, has sales of $2,450, current assets of $790, current liabilities of $480, net fixed assets of $1,640, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 10 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year?

$12.25 $245.00 $257.25 $182.75 $60.25 Wagner Industrial Motors, which is currently operating at full capacity, has sales of $2,450, current assets of $790, current liabilities of $480, net fixed assets of $1,640, and a 5 percent profit margin. The firm has no long-term debt and does not plan on acquiring any. The firm does not pay any dividends. Sales are expected to increase by 10 percent next year. If all assets, short-term liabilities, and costs vary directly with sales, how much additional equity financing is required for next year? MUST HAVE FULL BREAKDOWN TO GET RATING

Explanation / Answer

$60.25

Sales $2,450 Costs 0 Taxes 0 Net income $123 Current assets $790 Fixed assets 1640 Total assets $2,430 Current liabilities $480 Long-term debt 0 Equity $1,950 Total liabilities and equity $2,430 Dividend payout 0% Next year's projected sales $2,695 Assets, costs, and current liabilities are proportional to sales Pro forma income statement Sales $2,695 0 0 Net income $135 Pro forma balance sheet Current assets $869 Fixed assets 1804 Total $2,673 Current liabilities $528 Long-term debt 0 Equity 2084.75 Total $2,613 External funds needed (EFN) $60.25

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