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3 May, 21:51

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,200 was paid, and the company wishes to maintain a constant payout ratio. Next year's sales are projected to be $33,000. What is the external financing needed? Income Statement Balance SheetSales 30,000 Assets 56,100 Debt 20,500Costs 22,000 Equity 35,600Taxable Income 8,000 Total 56,100 Total 56,100Taxes (40%) 3200 Net Income 4800

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  1. 3 May, 22:00
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    An increase of sales to $33000: (33000 - 30000) / 30000 = 10%

    Sales 33000

    Cost (22000 + 10% of 22000) (24200)

    EBIT 8800

    Tax 40% 3520

    Net Income 5280

    Assets (56100+10% of 56100) 61710

    Total 58960

    Debt 20500

    Equity 38460

    Total 61710

    External financing needed is the difference between Assets and Liabilities+Equity, which is 61710 - 58960 = 2750
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