A firm has total assets of $162,000,long-term debt of $46,000,stockholders' equity of $95,000,and current liabilities of $21,000.The dividend payout ratio is 60 percent and the profit margin is 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 $150,000 are projected to increase by 10 percent?
A)$4,220
B)$54,820
C)$16,200
D)$38,700
E)$8,820

Question

Quizplus · Accepted Answer

Projected total assets = 1.1($162,000)= $178,200Projected current liabilities = 1.1($21,000)= $23,100Projected long-term debt = $46,000 (no change)Projected shareholders equity = $95,000 + (1.1 × $150,000 × .08 × (1 - .60))= $100,280EFN = $178,200 - 23,100 - 46,000 - $100,280 = $8,820

A Firm Has Total Assets of $162,000,long-Term Debt of $46,000,stockholders