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The most recent financial statements for Moose Tours, Inc., follow. Sales for 2003 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what is the external financing needed to support the 20 percent growth rate in sales?
MOOSE TOURS, INC.
2002 Income Statement
Sales
$980,000
Costs
770,000
Other expenses
14,000
Earnings before interest and taxes
$196,000
Interest paid
23,800
Taxable income
$172,200
Taxes (35%)
60,270
Net income
$111,930
Dividends
$44,772
Addition to retained earnings
67,158
Balance Sheet as of December 31, 2002
Assets
Liabilities and Owners' Equity
Current assets
Current liabilities
Cash
$ 28,000
Accounts payable
$ 70,000
Accounts receivable
49,000
Notes payable
7,000
Inventory
84,000
Total
$ 77,000
$161,000
Long-term debt
$168,000
Fixed assets
Owners' equity
Net plant and
Common stock and paid-in surplus
$ 21,000
equipment
$385,000
Retained earnings
280,000
Total assets
$546,000
$301,000
Total liabilities and owners' equity
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