The most recent financial statements for Assouad, Inc., are shown here: Current

Question

The most recent financial statements for Assouad, Inc., are shown here: Current $4,200 liabilities liabilities 2,700 Long-term 4,260 $9,500 Sales Costs Taxable$2,800 6700 Fixed assets 9400 debt Equity6,640 income Taxes (24%) 672 Total $13,600 Total $13,600 Net income $ 2128 Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 35 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 intermediate calculations and round your answer to 2 decimal places, e.g 32.16.) External financing needed re to search B TOSHIBA -10 4 5 678 9 0

Explanation / Answer

1. Increase in Retained Earnings in Next Year

Increase in Retained Earnings = (Sales - Costs) * (1 + Growth Rate) * (1 - tax) * (1 - Dividends)

Increase in Retained Earnings = (9500 - 6700) * (1 + 0.18) * (1 - 0.24) * (1 - 0.35)

Increase in Retained Earnings = $1632.18

2. Computation of External Finance Needed

EFN = Increase in Total Assets - Increase in Current Liabilities - Retained Earnings Increase

EFN = 13600 * 18% - 2700 * 18% - 1632.18

EFN = $2448 - 486 - 1632.18

EFN = $329.82

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