The most recent financial statements for Moose Tours, Inc., appear below. Sales
ID: 2818748 • 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?
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
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