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Perot Systems has total assets of $470,000, long-term debt of $161,000, stockholders' equity of $220,000, and...

Perot Systems has total assets of $470,000, long-term debt of $161,000, stockholders' equity of $220,000, and current liabilities of $89,000. The dividend payout ratio is 40 percent and the profit margin is 12 percent. Assume all assets and current liabilities change spontaneously with sales and the firm is currently operating at full capacity. What is the external financing need if the current sales of $540,000 are projected to increase by 12 percent?

$1,928.36

$2,017.20

$2,174.40

$2,239.12

$2,306.66

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Expert Solution

Particulars Current Projected
Sales 540000 604800
Profit Margin 12% 12%
Profit 64800 72576
Dividend payout 40% 40%
Dividend paid 25920 29030.4
Amount transferred to equity 38880 43545.6
Assets 470000 526400
Less: Current liabilities 89000 99680
Net assets financed from equity and debt 381000 426720
Equity 220000 220000
Profit for the year               -                 43,546
Amount to be financed externally 161000             163,174
Long term debt      161,000             161,000
External financing               -                   2,174

External financing needed is 2174.40

jeff jeffy answered 1 year ago
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