The most recent financial statements for Assouad, Inc., are shown here Balance S

Question

The most recent financial statements for Assouad, Inc., are shown here Balance Sheet Income Statement Sales Costs Current 5,850 liabilities Current $11,700 assets 3,525 Long-term 8,350 Fixed assets 10,500 debt 5,030 Taxable income $3,350 7,795 Equity Taxes (22%) 737 Total $16,350 Total $16,350 Net income $2,613 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 18 percent. What is the external financing needed? (Do not round Intermedlate calculatlons and round your answer to 2 decimal places, e.g., 32.16.) External financing needed

Explanation / Answer

Total assets would be=$16350*1.18=$19293

Current liabilities would be=$3525*1.18=$4159.50

Total liabilities=(4159.5+5030)=$9189.5

Total equity would be=$7795+Addition to retained earnings

=(7795+$1850.004)=$9645.004

Total assets=Total liabilities+Total equity

Hence external financing needed =(19293-9189.5-$9645.004)

=$458.50(Approx).

Sales(11700*1.18) 13806 Costs(8350*1.18) 9853 Taxable income $3953 Taxes@22% $869.66 Net income $3083.34 Less:dividend payout(3083.34*0.4) $1233.336 Addition to retained earnings $1850.004

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