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

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

Income Statement				Balance Sheet
Sales	$	6,700		Current assets	$	3,400		Current liabilities	$	2,200
Costs		5,300		Fixed assets		10,200		Long-term debt		3,750
Taxable income	$	1,400						Equity		7,650
Taxes (34%)		476		Total	$	13,600		Total	$	13,600
Net income	$	924

Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are projected to increase by exactly 15 percent.

What is the external financing needed? (Round your answer to 2 decimal places. (e.g., 32.16))

External financing needed

$

Explanation:

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

Pro forma income statement				Pro forma balance sheet
Sales	$	7,705.00		CA	$	3,910.00		CL	$	2,530.00
Costs		6,095.00		FA		11,730.00		LTD		3,750.00
Taxable income	$	1,610.00						Equity		8,393.82
Taxes (34%)		547.40		TA	$	15,640.00		Total D&E	$	14,673.82
Net income	$	1,062.60

The payout ratio is 30 percent, so dividends will be:

Dividends	=	0.30($1,062.60)
Dividends	=	$318.78

The addition to retained earnings is:

Addition to retained earnings	=	$1,062.60 – 318.78
Addition to retained earnings	=	$743.82

So the EFN is:

EFN	=	Total assets – Total liabilities and equity
EFN	=	$15,640 – 14,673.82
EFN	=	$966.18