The most recent financial statements for Reply, Inc., are shown here:

The most recent financial statements for Reply, Inc., are shown here:

Income Statement				Balance Sheet
Sales	$	33,600		Assets	$	54,100		Debt	$	22,100
Costs		25,600						Equity		32,000
Taxable income	$	8,000		Total	$	54,100		Total	$	54,100
Taxes (40%)		3,200
Net income	$	4,800

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,500 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $36,960.

What is the external financing needed? (Do not round intermediate calculations.)

External financing needed

$

 

Explanation:

An increase of sales to $36,960 is an increase of:

Sales increase	=	($36,960 – 33,600) / $33,600
Sales increase	=	.10, or 10%

Assuming costs and assets increase proportionally, the pro forma financial statements will look like this:

Pro forma income statement				Pro forma balance sheet
Sales	$	36,960		Assets	$	59,510		Debt	$	22,100
Costs		28,160						Equity		35,630
EBIT	$	8,800		Total	$	59,510		Total	$	57,730
Taxes (40%)		3,520
Net income	$	5,280