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    Dollars of new funds needed to finance growth

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    Owen's Electronics has 9 operating plants in seven southwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales. The firm is working at full capacity.

    Owen's has an aftertax profit margin of 7 percent and a dividend payout ratio of 40 percent.

    If sales grow by 10 percent next year, determine how many dollars of new funds are needed to finance the growth.

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    Solution Preview

    Current Forecasted
    Revenue 100.00 110.00
    Net Income 7.00 7.70 (7% of Sales)
    Dividends 2.80 3.08 (40% of Dividends)
    Retained Earnings 4.20 4.62

    Current Forecasted/Proforma
    Current ...

    Solution Summary

    This provides the steps to calculate the dollars of new funds in both a Word and Excel format to help understanding of the calculations.