a. Implied level of assets = 4580
Workings:
Implied level of sales in 2020= 1800 * 115% = 2070
Let the implied level of assets in 2020 be x
2070 = 50% *( 3700+ x) /2
x= 4580
b. Cash needed to raise = 473
Workings:
Assets | 4580 | Debt | 610 |
Equity | 3090 | ||
Retained earnings | 407 | ||
New equity required | 473 | ||
Total | 4580 | Total | 4580 |
Sales | 2070 | |
Costs | 1035 | [4580*50%] |
Interest | 18.3 | [610*3%] |
Pretax profit | 1017 | |
Tax | 203 | [2271.7*20%] |
Net income | 813 | |
Dividends | 407 | [813*50%] |
Retained earnings | 407 |
c. Debt ratio = (610+473) / 4580 = 23.65%
e following tables summarizes the 2019 income statement and end-year balance sheet of Drake's Bowling Alleys....
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