Reference no: EM131965788

1. A firm has total assets of $370,000, long-term debt of $140,000, stockholders' equity of $160,000, and current liabilities of $70,000. The dividend payout ratio is 30 percent and the profit margin is 8 percent. Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity. What is the external financing need if the current sales of $500,000 are projected to increase by 15 percent?

$11,200

$11,600

$12,000

$12,400

$12,800

2. The CFO of Gadget Supplies Ltd., has created the firm s pro forma balance sheet for the next fiscal year. Sales are projected to grow by 15 percent to $450 million. Current assets, fixed assets, and short-term debt are 25 percent, 60 percent, and 20 percent of sales, respectively. Gadget Supplies pays out 35 percent of its net income in dividends. The company currently has $150 million of long-term debt and $100 million in common stock par value. The profit margin is 8 percent. Based on the CFO s sales growth forecast, how much does Gadget Supplies need in external funds for the upcoming fiscal year? (Hint: you need to construct the balance sheet this year and determine the accumulated retained earnings before constructing the proforma balance sheets to determine the EFN)

$18,321.89

$16,595.20

$14,752.17

$12,465.81

$10,340.80