745 160 226 $ 369 Hungry Kids 2012 Balance Sheet 920 3,910 7,900 $ 9,475 $ 9,475

Question

745

160

226

$

369

Hungry Kids
2012 Balance Sheet

920    

3,910    

7,900    

$

9,475    

$

9,475

Hungry Kids is currently operating at full capacity (Hint: Thus all assets are spontaneous). The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 4 percent. What is the external financing need?

$62

$63

$17

$64

$18

Hungry Kids
2012 Income Statement   Net sales $ 5,900   Cost of goods sold 4,400   Depreciation

745

  Earnings before interest and taxes $ 755   Interest paid

160

  Taxable Income $ 595   Taxes

226

  Net income

$

369

     Dividends $ 90      Addition to retained earnings $ 279

Explanation / Answer

The external financing needed is $ 64.

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