The most recent financial statements for Moose Tours, Inc., appear below. Intere
ID: 2630232 • Letter: T
Question
The most recent financial statements for Moose Tours, Inc., appear below. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. The firm is operating at full capacity and no new debt or equity is issued. The tax rate is 35 percent.
MOOSE TOURS, INC. 2009 Income Statement Sales $ 943,000 Costs 718,000 Other expenses 17,000 Earnings before interest and taxes $ 208,000 Interest expense 11,000 Taxable income $ 197,000 Taxes 68,950 Net income $ 128,050 Dividends $ 64,025 Addition to retained earnings 64,025Explanation / Answer
What external financing is needed to support a 15 percent growth rate in sales?
Additional Fund needed = (154400-65000)*15% + 430000*15% = $ 77910
Retained Earning will be in next year:
External Financing Required = Additional Fund needed - Retained Earning generated
External Financing Required = 77910 - 74165
External Financing Required = $ 3,745
What external financing is needed to support a 25 percent growth rate in sales?
Additional Fund needed = (154400-65000)*25% + 430000*25% = $ 129850
Retained Earning will be in next year:
External Financing Required = Additional Fund needed - Retained Earning generated
External Financing Required = 129850 - 80925
External Financing Required = $ 48925
MOOSE TOURS, INC. Income Statement Sales 1,084,450 Costs 825,700 Other expenses 19,550 Earnings before interest and taxes 239,200 Interest expense 11,000 Taxable income 228,200 Taxes 79,870 Net income 148,330 Dividends 74,165 Addition to retained earnings 74,165