Decides to institute cost-cutting measures

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Reference no: EM131448218

The Company's financial statements for year 2525 show that year-end Total assets of $5, 425 include Plant, property, & equipment (PP&E) of $4,000 the assets are financed by Current liabilities of $1, 205, Debt of $1, 520 and Stockholders' equity of $2, 700. The annual Sales equal $32,000, total costs equal $31, 100, Net income equals $900, Dividends equal $270, and New retained earnings equal $630 For 2526 the company plans 10.00% sales growth. They plan to hold constant the asset turnover (sales/total assets) and payout ratio (= dividends/net income). They plan to increase Current Liabilities spontaneously with sales, while holding Debt constant. Suppose the company decides to institute cost-cutting measures that should increase the net profit margin (= net income sales) by 2.80% above its value of year 2525. Given the above plan, how much external financing is needed for year 2526?

Reference no: EM131448218

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