The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2020 Income Statement Sales $ 749,000 Costs 584,000 Other expenses 20,000 Earnings before interest and taxes $ 145,000 Interest paid 16,000 Taxable income $ 129,000 Taxes (21%) 27,090 Net income $ 101,910 Dividends $ 31,592 Addition to retained earnings 70,318 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 20,840 Accounts payable $ 55,000 Accounts receivable 43,780 Notes payable 14,200 Inventory 93,960 Total $ 69,200 Total $ 158,580 Long-term debt $ 132,000 Fixed assets Owners’ equity Net plant and equipment $ 425,000 Common stock and paid-in surplus $ 115,500 Retained earnings 266,880 Total $ 382,380 Total assets $ 583,580 Total liabilities and owners’ equity $ 583,580 If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales?
The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2020 Income Statement Sales $ 749,000 Costs 584,000 Other expenses 20,000 Earnings before interest and taxes $ 145,000 Interest paid 16,000 Taxable income $ 129,000 Taxes (21%) 27,090 Net income $ 101,910 Dividends $ 31,592 Addition to retained earnings 70,318 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 20,840 Accounts payable $ 55,000 Accounts receivable 43,780 Notes payable 14,200 Inventory 93,960 Total $ 69,200 Total $ 158,580 Long-term debt $ 132,000 Fixed assets Owners’ equity Net plant and equipment $ 425,000 Common stock and paid-in surplus $ 115,500 Retained earnings 266,880 Total $ 382,380 Total assets $ 583,580 Total liabilities and owners’ equity $ 583,580 If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales?
Chapter4: Financial Planning And Forecasting
Section: Chapter Questions
Problem 7P
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The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the |
| CROSBY, INCORPORATED | ||
| 2020 Income Statement | ||
| Sales | $ 749,000 | |
|---|---|---|
| Costs | 584,000 | |
| Other expenses | 20,000 | |
| Earnings before interest and taxes | $ 145,000 | |
| Interest paid | 16,000 | |
| Taxable income | $ 129,000 | |
| Taxes (21%) | 27,090 | |
| Net income | $ 101,910 | |
| Dividends | $ 31,592 | |
| Addition to |
70,318 |
| CROSBY, INCORPORATED | |||
| Balance Sheet as of December 31, 2020 | |||
| Assets | Liabilities and Owners’ Equity | ||
|---|---|---|---|
| Current assets | Current liabilities | ||
| Cash | $ 20,840 | Accounts payable | $ 55,000 |
| Accounts receivable | 43,780 | Notes payable | 14,200 |
| Inventory | 93,960 | Total | $ 69,200 |
| Total | $ 158,580 | Long-term debt | $ 132,000 |
| Fixed assets | Owners’ equity | ||
| Net plant and equipment | $ 425,000 | Common stock and paid-in surplus | $ 115,500 |
| Retained earnings | 266,880 | ||
| Total | $ 382,380 | ||
| Total assets | $ 583,580 | Total liabilities and owners’ equity | $ 583,580 |
|
If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 30 percent growth rate in sales? |
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