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The most recent financial statements for GPS, Inc., are shown here: Income Statement Sales $21706 Costs...

The most recent financial statements for GPS, Inc., are shown here:

Income Statement
Sales $21706
Costs $14096
Taxable Income ?
Taxes (40%) ?
Net Income ?
Balance Sheet
Assets $55199 Debt $22015
Equity ?

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1887 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $29409.

What is the external financing needed? (round 2 decimal places)

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Expert Solution

Income Statement Recent Projected
Sales 21706 29409.00
Costs 14096 19098.37
Taxable Income 7610 10310.63
Taxes 40% 3044 4124.25
Net Income 4566 6186.38
Less: Dividend 1887 2556.66
Retained earnings 2679 3629.72

EFN = (Projected assets - old assets) - Retained earnings

= (55199*29409/21706-55199) - 3629.72

=$15959.24

WORKINGS

jeff jeffy answered 1 year ago
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