please help and show each step The most recent financial statements for GPS, Inc
ID: 2810442 • Letter: P
Question
please help and show each step
The most recent financial statements for GPS, Inc., are shown here: Income Statement Balance Sheet Sales $23,900 Assets $124,000 Debt $32,600 Costs 17,200 Equity 91,400 Taxable income $6,700 Total $124,000 Total $124,000 Taxes (35%) 2,345 Net income $4,355
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,630 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $29,600.
Required: What is the external financing needed?
Multiple Choice
$26,198
$19,830
$234,171
$22,377
$21,103
Explanation / Answer
Growth rate in sales=(29600-23900)/23900
=0.238493723
Dividend payout ratio=Dividends/Net income
=(1630/4355)
=0.374282434
Total assets would be=$124000*1.238493723)=$153,573.2217
Total equity =Beginning equity+Addition to retained earnings
=(91400+$3374.895402)=$94774.8954
Total assets=Total equity+Total liabilities
Hence external financing needed=$153,573.2217-$94774.8954-$32600
which is equal to
=$26198(Approx).
Sales 29600 Costs(17200*1.238493723) $21302.09204 Taxable income $8297.90796 Taxes@35% $2904.267786 Net income $5393.640174 Dividends($5393.640174*0.374282434) $2018.744772 Addition to retained earnings $3374.895402Related Questions
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