Question

Question 5. (20 marks) The most recent financial statements for Fleury, Inc., follow. Sales for 2012 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, fixed 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 external financing is needed to support the 20 percent growth rate in sales? Fleury Inc. 2011 Income Statement 743,00 Sales 0 578,00 Costs 0 Other expenses 15,200 Earning before interest and 149,80 taxes 0 Interest paid 11,200 138,60 Taxable income 0 Taxes 48,510 Net Income 90,090 Dividends 27,027 Additions to retained earnings 63,063

Answer 1

Fleurry Inc
Current and projected Income statement	Current 2011	Projected 2012
Sales	743,000	891,600
Costs	578,000	693,600
Other Expenses	15,200	18,240
EBIT	149,800	179,760
Interest expense	11,200	11,200
Taxable income	138,600	168,560
Taxes @35%	48,510	58,996
Net Income	90,090	109,564
Net Income %	12.13%	12.29%
Dividends	27,027	32,869
Dividend payout rate =	30.00%	30.00%

a	Current Sales =S=	743,000
b	Net Income =	90,090
c	Projected Net Income % m	12.2885%
d	Spontanueous Total Asset =A =	452,720
e	Total Spontaneous Liability:accounts Payable=L=	54,400
f	A/S =	0.609314
g	L/S=	0.073217
h	Sales Growth =	20%
i	Prejected Sales Next Year =S1=	891,600
j	Delta Sales =Sales growth =	148,600
k	Dividend payout =d=5537/11797	30.00%
	EFN= A/S*deltaS-L/S*deltaS-m*S1*(1-d)
	EFN =0.609314*148600-0.073217*148600-12.2885%*891600*70%
	EFN =$2969.2
	So External Financing Needed is $2,969.20