The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, “Costs”...

The financial statements of Isabella Painting Supply are shown in the table below. For simplicity, “Costs” include interest. Assume that Isabella’s assets are proportional to its sales. (10 points)

Income Statement
Sales		$	3,950
Costs			1,750
Pretax income		$	2,200
Taxes (at 40.0%)			880
Net income		$	1,320

Balance Sheet, Year-End
	2019			2018			2019		2018
Net assets	$	6,000		$	5,700	Debt	$	2,500	$	2,400
						Equity		3,500		3,300
Total	$	6,000		$	5,700	Total	$	6,000	$	5,700

a. Find Isabella’s required external funds if it maintains a dividend payout ratio of 50% and plans a growth rate of 35% in revenue, expenses, and assets in 2020. Assume the tax rate remains constant.

b. If Isabella Painting Supply chooses not to issue new shares of stock, what is the value of debt in 2020?

c. Suppose that the firm plans instead to increase long-term debt only to $3,350 and does not wish to issue any new shares of stock. What must be the 2020 dividend payment now?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 10 months ago

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