INCOME STATEMENT, 2017 Sales = $390,000 Costs = $245,000 EBIT = $145,000 Interest expense = $29,000 Taxable income = $116,000 Taxes (at 35%) =
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INCOME STATEMENT, 2017

Sales = $390,000

Costs = $245,000

EBIT =

$145,000

Interest expense = $29,000

Taxable income = $116,000

Taxes (at 35%) = $40,600

Net income = $75,400

Dividends = $30,160

Addition to retained earnings = $45,240


Balance Sheet, Year-end, 2017

Assets


Current assets

Cash = $8,000

Accounts receivable = $13,000

Inventories = $29,000

Total Current assets = $50,000

Net plant and equipment = $330,000

Total assets $380,000


Liabilities

Current liabilities

Accounts payable = $15,000

Total current liabilities = $15,000

Long-term debt = $290,000


Stockholder's equity

Common stock plus additional paid-in capital = $15,000

Retained earnings = $60,000

Total liabilities and stockholder's equity = $380,000


Sales and costs are projected to grow at 30% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at 75% capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.40.


**(QUESTION)** 1. What is the required external financing over the next year? (Enter excess cash as a negative number with a minus sign.)

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