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How much the company needs an external financing

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A company had sales of $600,000 in 2017; it would increase by 50% in 2018. The company usually pays 30% as dividend. Gross profit is 25% of sales, and operating expenses are 50% of gross profit, since company solely relies on equity financing so there is no interest charges. Tax rate is 30%. Total Assets in 2017 are $400,000. While the liabilities which are directly related to sales are 40% of sales.

Question a) How much the company needs an external financing?

Question b) If the company`s policy is to maintain target capital structure of 40% debt, then how much financing would be done through equity?

Question c) If the company`s management decides to double the rate of dividend, then how much the company needs external financing?

Reference no: EM132588386

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