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External Funds Using Percentage of Sales

I am not certain how to work the formulas on this problem.

Using Percentage of Sales. Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales.

a. Find Eagle's required external funds if it maintains a dividend payout ratio of 70 percent and plans a growth rate of 15 percent in 2004.

b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? What will its value be?

c. Now suppose that the firm plans instead to increase long-term debt only to $1,100 and does not wish to issue any new shares of stock. Why must the dividend payment now be the balancing item? What will its value be?

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I am not certain how to work the formulas on this problem.

Using Percentage of Sales. Eagle Sports Supply has the following financial statements. Assume that Eagle's assets are proportional to its sales.

a. Find Eagle's required external funds if it maintains a dividend payout ratio of 70 percent and plans a growth rate of 15 percent in 2004.

b. If Eagle chooses not to issue new shares of stock, what variable must be the balancing item? What ...

Solution Summary

This explains the steps to find out External funds required using Percentage of Sales method

$2.19