The 2017 financial statements for Growth Industries are presented below.
INCOME STATEMENT, 2017Sales $360,000 Costs 230,000 EBIT $130,000 Interest expense 26,000 Taxable income $104,000 Taxes (at 35%) 36,400 Net income $67,600 Dividends$33,800 Addition to retained earnings 33,800
BALANCE SHEET, YEAR-END, 2017 Assets Liabilities Current assets Current liabilities Cash$5,000 Accounts payable$12,000 Accounts receivable 10,000 Total current liabilities$12,000 Inventories 35,000 Long-term debt 260,000 Total current assets$50,000 Stockholders' equity Net plant and equipment 300,000 Common stock plus additional paid-in capital 15,000 Retained earnings 63,000 Total assets$350,000 Total liabilities and stockholders' equity$350,000
Sales and costs are projected to grow at 30% a year for at least the next 4 years. Both current assets and accounts payable are projected to rise in proportion to sales. The firm is currently operating at full capacity, so it plans to increase fixed assets in proportion to sales. Interest expense will equal 10% of long-term debt outstanding at the start of the year. The firm will maintain a dividend payout ratio of 0.50.
What is the required external financing over the next year? (Negative amounts should be indicated by a minus sign.)