The most recent financial statements for Martin, Inc., are shown here: Assets an
ID: 2723705 • Letter: T
Question
The most recent financial statements for Martin, Inc., are shown here:
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,400 was paid, and Martin wishes to maintain a constant payout ratio. Next year’s sales are projected to be $32,660.
What is the external financing needed? (Do not round intermediate calculations.)
Income Statement Balance Sheet Sales $ 28,400 Assets $ 59,300 Debt $ 25,500 Costs 19,500 Equity 33,800 Taxable income $ 8,900 Total $ 59,300 Total $ 59,300 Taxes (40%) 3,560 Net income $ 5,340
Explanation / Answer
Next year income statement
Sales = 32,660
cost =22,425
PBT =10,235
tax 40% 4,094
6141
Dividend (44.943%) 2760
Retained earning 3381
Assets at new level =(59,300/28,400)*32,660
=68,195
New Equity =33,800+3381
=37,181
total debt required =68,195-37,181=31014
new financing required =31014-25,500
=5,514
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