Question

Problem 15-6 Additional Funds Needed (LG15-4)

Suppose that Wind Em Corp. currently has the balance sheet shown below, and that sales for the year just ended were $7.2 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.2 million next year.

Assets					Liabilities and Equity
Current assets	$	2,144,000			Current liabilities	$	2,717,280
Fixed assets		5,200,000			Long-term debt		1,600,000
					Equity		3,026,720
Total assets	$	7,344,000			Total liabilities and equity	$	7,344,000

If all assets and current liabilities are expected to grow with sales, what amount of additional funds will Wind Em need from external sources to fund the expected growth? (Enter your answer in dollars not in millions.)  

Answer 1