Purchase Solution

External funding and growth rate

Not what you're looking for?

Ask Custom Question

A company has the following Income Statement and Balance Sheet:
Income Statement
Sales $26,400
Expenses $17,300
Taxable Income $9,100
Taxes (40%) $3,640
Net Income $5,460

Dividends $ 2,300
Additional Retained Earnings 3,160

Balance Sheet
Total Assets $65,000 Debt $27,400
Equity $37,600
Total $6,5000 Total $65,000

Assets and costs are presumed to be proportional to Sales. Debt and Equity are not. Current dividends of $ 2,300 were paid; and the company's dividend policy is to maintain a constant payout ratio. Next year Sales are projected to be $ 30,360.
Given this information, how much additional (external) funding will the company need to support its projected Sales growth?
Prepare a pro forma Balance Sheet which reflects this estimated funding requirement as a "plug" number.
If the starting capital structure is considered optimal and flotation costs for equity are 5% and the administrative costs of borrowing are 3%, how much capital will the company need to raise to meet its projected asset requirements?
What is the external funding requirement if the company has a constant dividend policy with a 3% annual growth rate? (Do not consider flotation cost).

Purchase this Solution

Solution Summary

The solution discusses the external funding and growth rate.

Purchase this Solution

Free BrainMass Quizzes
Operations Management

This quiz tests a student's knowledge about Operations Management

Accounting: Statement of Cash flows

This quiz tests your knowledge of the components of the statements of cash flows and the methods used to determine cash flows.

Paradigms and Frameworks of Management Research

This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.

Writing Business Plans

This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations