Question

You have been told that a company had sales of $20,000 last year. The company's costs were $16,000 last year. The company's tax rate is 30%. The company paid a dividend of $1,120 last year. The company had assets of $50,000. It had debt of $20,000 and total equity of $30,000. Assets and costs are proportional to sales (therefore, assets and costs increase at the same rate as sales). The company's dividend payout ratio will not change next year. Next year's sales are projected to be $30,000. If debt does not change next year, and no new shares are issued by the firm, what is the amount of the external financing needed?

          You have been told that a company had sales of $20,000 last year. The company's costs were $16,000 last year. The company's tax rate is 30%. The company paid a dividend of $1,120 last year. The company had assets of $50,000. It had debt of $20,000 and total equity of $30,000. Assets and costs are proportional to sales (therefore, assets and costs increase at the same rate as sales). The company's dividend payout ratio will not change next year. Next year's sales are projected to be $30,000. If debt does not change next year, and no new shares are issued by the firm, what is the amount of the external financing needed?

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