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

Solutions

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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