Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,300 was paid,...

Question

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,300 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $30,360. What is the external financing needed?

Robert · Accepted Answer

The most recent financial statements for GPS, Inc., are shown here. 
Income StatementBalance Sheet 
Sales $26,400 Assets $65,000 Debt $27,400 
Costs 17,300 
  
Equity 37,600 
Taxable Income $9,100 Total $65,000 Total $65,000 
Taxes (40%) 3,640 
    
Net Income $5,460 
    
Assets and costs are proportional to sales.Debt and equity are not. A dividend of 
$2,300 was paid,

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,300 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be...

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