Question

Help Save & Exit Submit Check my work Problem 18-12 Using Percentage of Sales (LO2) Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales. INCOME STATEMENT, 2019 Sales $1,15e Costs 22e Interest Taxes Net Income Hint 2018 3,200 Assets $ BALANCE SHEET, YEAR-END 2019 $ 3,500 Debt Equity Total $ $ 2018 1.400 1.800 3,200 2019 1.500 2.689 3,5ee Total $ 3. $ $ a. Find Eagle's required external funds if it maintains a dividend payout ratio of 70% and plans a growth rate of 20% in 2020. (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? c. What will be the value of this balancing item? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Now suppose that the firm plans instead to increase long-term debt only to $1,600 and does not wish to issue any new shares of stock. What is now the balancing item?

Answer 1

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BOND- Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins Σ AutoSum - Cut A A Wrap Text Calibri 11 General Copy Fill Merge & Center Insert Delete Format Paste B I U +.0 .00 .00 0 Conditional Format Cell Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Number Clipboard Font Alignment Styles Cells Editing fox F1069 A В C D E F G Н 1050 1051 1052 1053 EAGLE SPORTS 1054 1055 a EXISTING SALES 1150 20% 1056 INCREASE IN SALES= 63.47826% [730/1150] 1057 PROFIT MARGIN = 1058 70% DIVIDEND PAYOUT = 1059 1060 EXTERNAL FINANCING REQUIRED = INCREASE IN TOTAL ASSETS - INCREASE IN RETAINED EARNINGS (3500 X 20%) - (1150 X (1+0.20)*(63.47826%)*(0.30)) 1061 EXTERNAL FINANCING REQUIRED =700 262.8 1062 EXTERNAL FINANCING REQUIRED 1063 EXTERNAL FINANCING REQUIRED = 437.20 1064 1065 b DEBT IF COMPANY DOES NOT ISSUE SHARES THEN DEBT MUST BE ISSUED 1066 1067 c 437.20 (AMOUNT IS SAME AS EXTERNAL FUNDING NEED) VALUE OF THE BALANCING ITEM = 1068 1069 d IF DEBT ISSUED = 1600 1070 THE NEW BALANCING ITEM IS RETAINED EARNINGS Sheet2 S3CLEAN PRICE S10 S6 EUAC AW LIFE S4 YIELD SPOT NOTE AFN BANKING S1 BIDDING, UNDERWRITING LP, IP, MRP, INFLATION WARRANT refund S5 Rea erences: FV395 120% WA 04:11 小和 ENG 27-11-2019

BOND- Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins Σ AutoSum - Cut A A Wrap Text Calibri 11 General Copy Fill Merge & Center Insert Delete Format Paste B I U +.0 .00 .00 0 Conditional Format Cell Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fox B1079 Formula Bar A В E F G Н 1068 1069 d IF DEBT ISSUED 1600 1070 THE NEW BALANCING ITEM IS RETAINED EARNINGS 1071 1072 e EXTERNAL FUNDING NEED = 437.20 NEW DEBT ISSUED = 1600 - 1500 100 SO RETAINED EARNINGS SHOULD INCREASE BY = 437.20 - 100 SO RETAINED EARNINGS SHOULD INCREASE BY = 337.2 VALUE OF THE BALANCING ITEM = 262.8 +337.2 600.00 1073 1074 1075 1076 1077 1078 1079 1080 1081 1082 1083 1084 1085 1086 1087 1088 Sheet2 AFN BIDDING, UNDERWRITING S6 S4 YIELD SPOT LP, IP, MRP, INFLATION BANKING NOTE S1 S3 CLEAN PRICE S10 EUAC AW LIFE WARRANT refund S5 erences: FV395 Rea 120% WA 04:11 小和 ENG 27-11-2019