What is the external financing needed to support

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Reference no: EM13515298

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?

MOOSE TOURS, INC.

2002 Income Statement

Sales


$980,000

Costs


770,000

Other expenses


14,000

Earnings before interest and taxes


$196,000

Interest paid


23,800

Taxable income


$172,200

Taxes (35%)


60,270

Net income


$111,930

Dividends

$44,772


Addition to retained earnings

67,158


MOOSE TOURS, INC.

Balance Sheet as of December 31, 2002

Assets


Liabilities and Owners' Equity


Current assets


Current liabilities


Cash

$ 28,000

Accounts payable

$ 70,000

Accounts receivable

49,000

Notes payable

7,000

Inventory

84,000

Total

$ 77,000

Total

$161,000

Long-term debt

$168,000

Fixed assets


Owners' equity


Net plant and


Common stock and paid-in surplus

$ 21,000

equipment

$385,000

Retained earnings

280,000

Total assets

$546,000

Total

$301,000



Total liabilities and owners' equity

$546,000

Reference no: EM13515298

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