Final answer:
Without adequate data on assets, liabilities, equity, and retained earnings, it is impossible to provide an accurate answer to the question regarding the calculation of external financing needed after a 10% increase in sales.
Step-by-step explanation:
The question asks for the calculation of external financing needed for a company operating at full capacity, when its sales increase by 10 percent, given certain financial constants and variations directly proportional to sales.
To determine this, one would usually analyze the company's financial statements to identify the proportion of sales to assets, costs, and current liabilities,
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understand the dividend payout ratio, and then apply these ratios to the projected increase in sales. This would allow for a prediction of how much additional financing would be needed to support the increased level of business activity.
However, the information provided is not directly relevant to calculating external financing needs after a 10% sales increase. The data given seems to pertain to present value calculations and stock pricing rather than financing requirements.
Therefore, without adequate data on assets, liabilities, equity, and retained earnings, it is impossible to provide an accurate answer to the question of external financing needs.
Your complete question is: Use the below information to answer the following question.
Income Statement
For the Year
Sales
$42,700
Cost of goods sold
29,250
Depreciation
3,750
Earnings before interest and taxes
$ 9,700
Interest paid
1,360
Taxable income
$ 8,340
Taxes
2,840
Net income
$ 5,500
Dividends $1,925
Balance Sheet
End-of-Year
Cash
$1,320
Accounts receivable
3,780
Inventory
10,200
Total current assets
$15,300
Net fixed assets
33,600
Total assets
$48,900
Accounts payable
$ 3,650
Long-term debt
18,100
Common stock ($1 par value)
15,000
Retained earnings
12,150
Total Liab. & Equity
$48,900
The profit margin, the debt-equity ratio, and the dividend payout ratio for this firm are constant. Sales are expected to increase by $5,000 next year. What is the projected addition to retained earnings for next year?
A.
$3,575
B.
$1,885
C.
$1,909
D.
$3,994
E.
$2,386
Assume this firm is operating at full capacity. Also assume that all costs, net working capital, and fixed assets vary directly with sales. The debt-equity ratio and the dividend payout ratio are constant. What is the pro forma accounts payable value for next year if sales are projected to increase by 7.5 percent?
A.
$3,650
B.
$3,924
C.
$4,121
D.
$4,248
E.
$4,810
Assume this firm is operating at full capacity. Also assume that assets, costs, and current liabilities vary directly with sales. The dividend payout ratio is constant. What is the external financing need if sales increase by 14 percent?
A.
–$1,816
B.
–$1,268
C.
$1,031
D.
$3,504
E.
$2,260
This firm is expecting sales to decrease by 3 percent next year while the profit margin remains constant. The firm wants to increase the dividend payout ratio by 2.5 percent. What is the projected increase in retained earnings for next year?
A.
$1,711
B.
$1,867
C.
$3,334
D.
$1,969
E.
$3,438
show the explanation to the questions please.