Answer: $1,448.75
Explanation:
Sales are to increase by 25% along with Assets, costs and current liabilities.
Sales (3,700 * 1.25) $4,625
Less: Costs ( 1,800 * 1.25) <u> $2,250</u>
Taxable Income $2,375
Tax (2,375 * 34%) <u> $807.50</u>
Net Income $1,567.50
Addition to retained earnings = Net Income - Dividends
= 1,567.50 - ( 1,567.50 * 50%)
= $783.75
Equity = 5,430 + 783.75 = $6,213.75
Assets = 9,900 * 1.25 = $12,375
Total Liability = Long term debt + Current liability
= 3,500 + (970 * 1.25)
= $4,712.50
Assets = Liability + Equity
12,375 ≠ 4,712.50 + 6,213.75
External financing needed = 12,375 - 4,712.50 - 6,213.75
= $1,448.75
