The most recent financial statements for Fleury, Inc., follow. Sales for 2012 ar
ID: 2820865 • Letter: T
Question
The most recent financial statements for Fleury, Inc., follow. Sales for 2012 are projected to grow by 20 percent. Interest expense will remairn 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 20 percent growth rate in sales? Sales Costs Other expenses EBIT Interest expense Taxable income Taxes Net income 743,000 Assets Liabilities and owners' equit Current liabilities 578,000 Current assets 149,800 138,600 15,200 11,200 48,510 Fixed assets 20,240 32,560 69,520 Accounts payable $ 54,400 13,600 $ 68,000 $ 126,000 Cash Accounts receivable Inventory Notes payable Total Total $ 122,320 Long-term debt Net plant and equipment Owners' equity $ 330,400 Dividends Add. to retained earnings 27,027 63,063 Common stock and paid-in surplus Retained earnings $ 112,000 146,720 $ 258,720 Total Total liabilities and $ 452,720 owners' equity 20.00% 35% Total assets 452,720 Sales increase Tax rateExplanation / Answer
Dividend payout ratio 30.00% 27027/90090 2012 Pro Forma Income Statement Sales $ 891600 743000*120% Costs $ 693600 0.777927 578000/743000 Other Expenses $ 18240 0.020458 15200/743000 EBIT $ 179760 Interest Expense $ 11200 Taxable Income $ 168560 Taxes @ 35% $ 58996 Net Income $ 109564 Dividends @ 30% $ 32869.2 Add to RE $ 76694.8 2012 Pro Forma Balance Sheet Assets Liabilities and owner's equity Current assets Current Liabilities 20240/743000 0.027241 Cash $ 24288 Accounts Payable $ 65280 0.073217 54400/743000 32560/743000 0.043822 Accounts Receivable $ 39072 Notes Payable $ 13600 0.018304 13600/743000 69520/743000 0.093567 Inventory $ 83424 Total $ 78880 Total $ 146784 Long Term Debt $ $126,000 Fixed Assets $ Owners Equity 330400/743000 0.444684 Net Plant and equipment $ 396480 Common Stock and paid-in surplus $ $112,000 Retained earnings $ 223414.8 (146720+76694.80) Total $ 335414.8 Total Assets $ 543264 Total Liabilities and owners equity $ 540294.8 External Financing = 543264-540294.80 2969.2 External Financing Needed for full capacity = A0/S0*(S1-S0) - L0/S0(S1-S0)-PM(S1)b 452720/743000*(891600-743000) - 68000/743000*(891600-743000)-(90090/743000)*891600*0.70 90544-10880-75675.60 $3,988.40