The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 20 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 $763,000
Costs 598,000
Other expenses 34,000
Earnings before interest and taxes $ 131,000
Interest paid 30,000
Taxable income $ 101,000
Taxes (25%) 25,250
Net income $ 75,750
Dividends $ 23,483
Addition to retained earnings 52,267
CROSBY, INC.
Balance Sheet as of December 31, 2017
Assets Liabilities and Owners
Current assets Current liabilities
Cash $ 22,240 Accounts payable $ 56,400
Accounts receivable 45,180 Notes payable 15,600
Inventory 107,960 Total $ 72,000
Total $ 175,380 Long-term debt $ 146,000
Fixed assets Owner's equity
Net plant and
equipment $ 439,000 Common stock and
paid-in surplus 2500
Retained earnings 273,880
Total $ 396,380
Total assets $ 614,380 Total liabilities and
owners equity $ 614,380
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?