The most recent financial statements for Moose Tours, Inc., appear below. Sales
ID: 2729350 • 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.
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.)
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.
Explanation / Answer
Details Amt $ Given : Sales =S= 761,000 the sales increase is delS@25%= 190,250 Total sales after increase=S1=(s+delS) 951,250 TOtal Assets=A= 577,720 Assets/sales =A/S= 0.7592 Net Margin =m= 13.7% dividend payout ratio=d=Dividend payout/net income= 20.0% Spontaneous Liability =Current Laib =L= 56,200 L/S= 0.074 External fund needed=EFN=A/s*delS-L/s*delS-m*s1*(1-d)=0 =0.7592*190250-0.0739*190250-0.1367*951250*0.80 =26102 So external funding needed =$26,102