Reference no: EM132044211
1. The most recent financial statements for Last in Line, Inc., are
shown below:
Income Statement Balance Sheet
Sales $23,000 Assets $115,000 Debt $ 38,600
Costs 16,500 Equity 76,400
------- -------- -------
Taxable income $ 6,500 $115,000 $115,000
Taxes (40%) 2,600 ======== ========
-------
Net Income 3,900
=======
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,560 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $27,600. What is the external financing needed?
2. The most recent financial statements for 7 Seas, Inc., are shown below:
Income Statement Balance Sheet
Sales $ 3,400 Current Assets $4,400 Current Liab. $ 880
Costs 2,800 Fixed assets 5,700 Long-term debt 3,580
------- Equity 5,640
Taxable income $ 600 -------- -------
Taxes (34%) 204 $10,100 $10,100
------- ======== ========
Net Income 396
=======
Assets, costs, and current liabilities are proportional to sales.
Long-term debt and equity are not. The company maintains a constant 50% payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 15%. What is the external financing needed?
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