Rossiter's currently has total assets of $203,000,long-term debt of $78,400,and current liabilities of $36,700.The dividend payout ratio is 25 percent and the profit margin is 5.8 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 $185,000 are projected to increase by 5 percent?
A)$182.40
B)-$54.82
C)$162.09
D)$387.40
E)-$134.88

Question

Quizplus · Accepted Answer

Projected total assets = 1.05 × $203,000 = $213,150
Projected current liabilities = 1.05 × $36,700 = $38,535
Projected long-term debt = $78,400 (no change)
Current stockholders' equity = $203,000 - $36,700 - $78,400 = $87,900
Projected shareholders equity = $87,900 + (1.05 × $185,000 × 0.058 × (1 - 0.25))= $96,349.88
EFN = $213,150 - $38,535 - $78,400 - $96,349.88 = -$134.88

Rossiter's Currently Has Total Assets of $203,000,long-Term Debt of $78,400,and