The most recent financial statements for Moose Tours, Inc., follow. Sales for 2003 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. If the firm is operating at full capacity and no new debt or equity is issued, what is the external financing needed to support the 20 percent growth rate in sales?
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MOOSE TOURS, INC.
2002 Income Statement
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Sales
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$980,000
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Costs
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770,000
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Other expenses
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14,000
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Earnings before interest and taxes
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$196,000
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Interest paid
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23,800
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Taxable income
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$172,200
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Taxes (35%)
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60,270
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Net income
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$111,930
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Dividends
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$44,772
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Addition to retained earnings
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67,158
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MOOSE TOURS, INC.
Balance Sheet as of December 31, 2002
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Assets
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Liabilities and Owners' Equity
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Current assets
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Current liabilities
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Cash
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$ 28,000
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Accounts payable
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$ 70,000
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Accounts receivable
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49,000
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Notes payable
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7,000
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Inventory
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84,000
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Total
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$ 77,000
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Total
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$161,000
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Long-term debt
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$168,000
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Fixed assets
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Owners' equity
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Net plant and
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Common stock and paid-in surplus
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$ 21,000
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equipment
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$385,000
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Retained earnings
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280,000
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Total assets
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$546,000
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Total
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$301,000
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Total liabilities and owners' equity
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$546,000
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