External Funds Needed The Optical Scam Company has forecast a 20 percent sales growth rate for next year. The current financial statements are shown here:
Income Statement | ||
Sales |
| $30,400,000 |
Costs |
| 26,720,000 |
Taxable income |
| $ 3,680,000 |
Taxes |
| 1,288,000 |
Net income |
| $ 2,392,000 |
Dividends | $ 956,800 |
|
Addition to retained earnings | 1,435,200 |
|
Balance Sheet | |||
Assets | Liabilities and Equity | ||
Current assets $ | 7,200,000 | Short-term debt | $ 6,400,000 |
|
| Long-term debt | 4,800,000 |
Fixed assets | 17,600,000 |
|
|
|
| Common stock | $ 3,200,000 |
|
| Accumulated retained earnings | 10,400,000 |
|
| Total equity | $13,600,000 |
Total assets | $24,800,000 | Total liabilities and equity | $24,800,000 |
a.Using the equation from the chapter, calculate the external funds needed for next year.
b.Construct the firm’s pro forma balance sheet for next year and confirm the external funds needed that you calculated in part (a).
c.Calculate the sustainable growth rate for the company.
d.Can Optical Scam eliminate the need for external funds by changing its dividend policy? What other options are available to the company to meet its growth objectives?
We need at least 10 more requests to produce the solution.
0 / 10 have requested this problem solution
The more requests, the faster the answer.