Question

Owen’s Electronics has nine operating plants in seven southwestern states. Sales for last year were $100 million, and the balance sheet at year-end is similar in percentage of sales to that of previous years (and this will continue in the future). All assets (including fixed assets) and current liabilities will vary directly with sales. The firm is working at full capacity.

Balance Sheet (in $ millions)
Assets			Liabilities and Stockholders' Equity
Cash	$	10	Accounts payable	$	23
Accounts receivable		28	Accrued wages		10
Inventory		31	Accrued taxes		16
Current assets	$	69	Current liabilities	$	49
Fixed assets		48	Notes payable		18
			Common stock		23
			Retained earnings		27
Total assets	$	117	Total liabilities and stockholders' equity	$	117

Owen’s has an aftertax profit margin of 8 percent and a dividend payout ratio of 30 percent.

If sales grow by 20 percent next year, determine how many dollars of new funds are needed to finance the growth. (Do not round intermediate calculations. Enter your answer in dollars, not millions, (e.g., $1,234,567).)
  

	New funds

Answer 1