Reference no: EM132657181

Problem 1: Global developed the pro forma financial statements given below. Assume that Global Corp. expects sales to grow by 8?% next? year, pays out 60?% of its net? income, and needs ?$8.4 million of net new financing. If Global decides that it will limit its net new financing to no more than ?$7.9 ?million, how will this affect its payout? policy?

If Global limits new financing to only ?$7.9 ?million, then it would need to increase/cut its payout to shareholders by ?$ _________ million to make up the difference on its balance sheet.

Income Statement ($million)

Sales 183.1
Costs Except Depreciation -178.1
EBITDA 5.0
Depreciation and Amortization -1.3
EBIT 3.7
Interest Expense (net) -7.7
Pretax Income -4.0
Income Tax 1.0
Net Income -3.0

Balance Sheet ($million)
Assets

Cash 23.7
Accounts Receivable 16.7
Inventories 15.8
Total Current Assets 56.2
Property, Plant, and Equipment 110.9
Total Assets 167.1

Liabilities and Equity

Accounts Payable 34.5
Long-term Debt 115.0
Total Liabilities 149.5
Stockholders' Equity 17.6
Total Liabilities and Equity 167.1