The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INC.
2017 Income Statement
Sales $ 755,000
Costs 590,000
Other expenses 26,000
Earnings before interest and taxes $ 139,000
Interest paid 22,000
Taxable income $ 117,000
Taxes (22%) 25,740
Net income $ 91,260
Dividends $ 28,291
Addition to retained earnings 62,969
CROSBY, INC.
Balance Sheet as of December 31, 2017
Assets Liabilities and Owners’ Equity
Current assets Current liabilities
Cash $ 27,920 Accounts payable $ 71,720
Accounts receivable 42,630 Notes payable 17,620
Inventory 95,910 Total $ 89,340
Total $ 166,460 Long-term debt $ 170,000
Fixed assets Owners’ equity
Net plant and equipment $ 455,980 Common stock and paid-in surplus $ 140,000
Retained earnings 223,100 Total $ 363,100
Total assets $ 622,440 Total liabilities and owners’ equity $ 622,440
If the firm is operating at full capacity and no new debt or equity is issued, what external financing is needed to support the 20 percent growth rate in sales?