Question

Planet Food is currently operating at full capacity. The profit margin and the dividend payout ratio are held constant. Net working capital and fixed assets vary directly with sales. Sales are projected to increase by 6 percent. What is the external financing need

Answer 1

The answer is $30

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Step-by-step explanation:

Solution

Given that

The total assets projected = $8,850 × 1.06

= $9,381.00

Projected accounts payable = $1,300 × 1.06

= $1,378.00

Projected retained earnings = $3,810 + ($399 × 1.06)

= $4,232.94

Thus

External financing need = $9,381.00 - $1,378.00 -$1,640 -$2,100 - $4,232.94 = $30

Therefore the external financing need is $30.