Reference no: EM132634847

Intro - Model Corp.'s most recent balance sheet and income statement are given below (all numbers in $ million):

Assets                                       Liabilities and Equity

Cash 38                              Accounts payable 114

Accounts receivable 76         Current liabilities 114

Inventory 114                      Long-term debt 152

Current assets 228               Total liabilities 226

Machinery 152                       Equity 114

Total assets 180                   Total liab. & equity 380

Income statement

Sales 100

Costs 60

Depreciation 20

EBIT 20

Interest 6.08

Taxable income 13.92

Taxes 4.733

Net income 9.19

Sales, assets and costs (including depreciation) are expected to grow by 31% next year, while the tax rate and long-term debt will stay constant. The company pays out 60% of net income as dividends.

Problem 1: Using the percentage of sales method, what will be the net income next year (in $ million)?

Problem 2: Using the percentage of sales method, what should be the book value of equity by end of next year as a result of net income and dividend payout before any EFN is funded (in $ million)?

Problem 3: What is the external financing needed (EFN) for next year (in $ million)?