Sales and Growth
The most recent financial statements for Tool Co. are shown here:
|
Income Statement |
Balance Sheet |
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|
Sales |
$46,000 |
Net working capital |
$ 21,000 |
Long term debt |
$ 60,000 |
|
Costs |
30,400 |
Fixed assets |
100,000 |
Equity |
61,000 |
|
Taxable income |
$15,600 |
Total |
$121,000 |
Total |
$121,000 |
|
Taxes (34%) |
5,304 |
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|
Net income |
$10,296 |
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Assets and costs are proportional to sales. Tool Co. maintains a constant 30 percent dividend payout ratio and a constant debt equity ratio. What is the maximum increase in sales that can be sustained assuming no new equity is issued?