The most recent financial statements for Moose Tours, Inc., appear below. Sales
ID: 2810822 • Letter: T
Question
The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. MOOSE TOURS, INC. 2015 Income Statement Sales $ 753,000 Costs 588,000 Other expenses 24,000 Earnings before interest and taxes $ 141,000 Interest expense 10,000 Taxable income $ 131,000 Taxes (40%) 52,400 Net income $ 78,600 Dividends $ 31,440 Addition to retained earnings 47,160 MOOSE TOURS, INC. Balance Sheet as of December 31, 2015 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 21,240 Accounts payable $ 55,400 Accounts receivable 33,560 Notes payable 14,600 Inventory 70,520 Total $ 70,000 Total $ 125,320 Long-term debt $ 101,000 Fixed assets Owners’ equity Net plant and equipment $ 210,000 Common stock and paid-in surplus $ 100,000 Retained earnings 64,320 Total $ 164,320 Total assets $ 335,320 Total liabilities and owners’ equity $ 335,320 If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 25 percent growth rate in sales? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) External financing needed $ -36,730 incorrect
Explanation / Answer
Solution:
2,015.00 2016 25% increase in sales
Sales 7,53,000.00 9,41,250.00
Costs 5,88,000.00 7,35,000.00
Other Expenses 24,000.00 30,000.00
EBIT 1,41,000 1,76,250.00
Interest Expense 10,000.00 10,000.00
Taxable Income 1,31,000.00 1,66,250.00
Taxes 52,400.00 66,500.00
Net Income 78,600.00 99,750.00
Divdend 31,440.00 39,900.00
To Retained Earnings 47,160.00 59,850.00
Current Assets 1,25,320.00 1,56,650.00
Fixed Assets 2,10,000.00 2,62,500.00
Total 3,35,320.00 4,19,150.00
Current Liabilities -70,000.00 -90,000.00
Longterm Debt -1,01,000.00 -1,01,000.00
Share capital -1,00,000.00 1,00,000.00
Retained Earnings 64,320.00 1,24,170.00
Total -4,15,170.00
Difference 3,980.00
External Financing needed 3,980.00
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