Question

24. Long-term financial plans The financial statements of Eagle Sport Supply are shown in Table 29.17. For simplicity. "Costs include interest. Assume that Eagle's assets are proportional to its sales. 1. Find Eagle's required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 15% in 2020. 2. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? What will its value be? 3. Now suppose that the firm plans instead to increase long-term debt only to $1,100 and does not wish to issue any new shares of stock. Why must the dividend payment now be the balancing item? What will its value be? Table 29.7 Financial statements for Eagle Sport Supply, 2019. See Problem 25. Income Statement Sales $950 Costs 250 = Prox income 700 Taxes (at 28.6%) 200 Net income $500 Balance Sheet, Year End 2019 2018 2019 2018 Net assets $3,000 $2,700 Debt $1.000 $900 Equity 2.000 1.800 Total $3,000 $2,700 Total $3.000 $2.700

Answer 1

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Retened kainingsrin Newlectaired earnings New Net Income x -payout Ry Bir 500+(500X15%7*(1-50%) La Petits 315 X50% h o ve ž 287.50 $ Calculation of external lunch! External funcluz New Investment - New Retaned Eally (3.000x 15%-287.50 lisice 2 450-282SO 474" 2 162.5% or 2. As Eagle not wants to issue new share of stock, preant dividend policy & fixed, then deft å balancing items Value op debt 1,62:5$ amount of requiseed external fund all rill dividend payment calwlation i linividends - Net Income Retained kanine Heroll indend is increase Net Income - (Increase in asset - det isul 3782(3000X15%-100] [1100 -1000) Deot