Trying to find the external financing needed to support the 20% growth rate in sales of a company who is operating at full capacity and no debt or equity is issued with the following information:
Sales for 2007 are projected to grow by 20 percent.
Interest expense will remain constant; the tax rate and the dividend payout rate will remain constant.
Costs, other expenses, current assests, and accounts payable increase spontaneously with sales.© BrainMass Inc. brainmass.com March 4, 2021, 8:22 pm ad1c9bdddf
Please see the attached file.
In calculating the EFN we first make the proforma income statement and balance sheet
Sales $845,000 1,014,000 Sales will increase by 20%
Costs 657,000 788,400 Costs will increase by 20% - the same rate as sales
Other Expenses 17,500 21,000 Costs will increase by 20% - the same rate as sales
Earnings before interest and taxes $170,500 204,600
Interest paid 12,500 12,500 remains the ...
The solution explains how to determine the amount of external financing needed given the growth in sales