Question

The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

MOOSE TOURS, INC. 2015 Income Statement
Sales				$	746,000
Costs					581,000
Other expenses					17,000
Earnings before interest and taxes				$	148,000
Interest expense					14,000
Taxable income				$	134,000
Taxes (20%)					26,800
Net income				$	107,200
Dividends	$	21,440
Addition to retained earnings		85,760

  

MOOSE TOURS, INC. Balance Sheet as of December 31, 2015
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	20,540		Accounts payable	$	54,700
Accounts receivable		32,860		Notes payable		13,900
Inventory		69,820
				Total	$	68,600
Total	$	123,220		Long-term debt	$	129,000
Fixed assets				Owners’ equity
Net plant and equipment	$	462,000		Common stock and paid-in surplus	$	115,000
				Retained earnings		272,620
				Total	$	387,620
Total assets	$	585,220		Total liabilities and owners’ equity	$	585,220

If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 25 percent growth rate in sales? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

Answer 1

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