Reference no: EM132986362

The following information pertains to Cutler Company Balance Sheet and Income Statement

Balance Sheet

End of 2009

Cash 180,000

A/R 160,000

Inventory 110,000

Fixed Assets 300,000

Less Accumulated Depr. 200,000

Net Fixed Assets 100,000

Total Assets 550,000

Accounts Payable 50,000

Bonds Payable 100,000

Common Stock 100,000

Capital paid in excess of Par 75,000

Retained Earnings 225,000

Total Liabilities and

Stockholder's Equity 550,000

Income Statement

SALES $1,000,000

LESS COGS 400,000

GROSS PROFIT 600,000

LESS OPERATING EXPENSES 300,000

LESS DEPRECIATION EXPENSE 100,000

EBIT 200,000

LESS INTEREST EXPENSE 50,000

EBT 150,000

LESS TAXES 60,000

EAT $90,000

Problem 1: Assume that only current assets and current liabilities vary directly with sales. Cutler is expected to increase sales next year by $300,000. Assuming the profit margin is 9% and that the dividend payout ratio is 40%, how much new financing will Cutler need?