The most recent financial statements for Ramailo Tours Company are shown below: Income Statement for year ended December 31, 2016 Sales Rs. 845,000…
BBS Fundamentals of Corporate Finance · 2077 · Solved Question with Answer
The most recent financial statements for Ramailo Tours Company are shown below:
Income Statement for year ended December 31, 2016
| Sales | Rs. 845,000 |
| Costs | (657,000) |
| Other expenses | (17,500) |
| Earnings before interest and taxes | Rs. 176,000 |
| Interest paid | (12,500) |
| Taxable income | Rs. 158,000 |
| Taxes (35%) | (55,000) |
| Net income | Rs. 102,700 |
| Dividends | Rs. 30,810 |
| Addition to retained earnings | Rs. 71,890 |
Balance Sheet as of December 31, 2016
| Assets | Liabilities and Owners' equity | ||
| Current assets | Current liabilities | ||
| Cash | Rs. 23,000 | Accounts Payable | Rs. 62,000 |
| Receivables | 37,000 | Notes payable | 15,000 |
| Inventory | 79,000 | Total Current Liabilities | Rs. 77,000 |
| Total current assets | Rs. 139,000 | Long-term debt | 144,000 |
| Fixed assets | Owners' equity | ||
| New plant and equipment | 375,000 | Common stock and paid-in surplus | Rs. 100,000 |
| Retained earnings | 193,000 | ||
| Total owners' equity | Rs. 293,000 | ||
| Total assets | Rs. 514,000 | Total liabilities and equity | Rs. 514,000 |
a. Assume that sales for 2017 are projected to grow by 20 percent. Interest expenses will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets and accounts payableincrease spontaneously with sales. If the firm is operating at full capacity, what external financing is needed to support the 20 percent growth rate in sales?