The Landis Corporation had 2009 sales of $204 million. The balance sheet items that vary directly with sales and the profit margin are as follows: , Percent , Cash 6% , Accounts receivable 11% , Inventory 18% , Net fixed assets 39% , Accounts payable 17% , Accruals 6% , Profit margin after taxes 5% ,The dividend payout rate is 50 percent of earnings, and the balance in retained earnings at the end of 2009 was $73.0 million. ,Common stock and the company’s long-term bonds are constant at $10 million and $5 million, respectively. Notes payable are currently $16 million.,a. How much additional external capital will be required for next year if sales increase 12 percent. , (Assume that the company is already operating at full capacity.) ,b. What will happen to external fund requirements if Landis Corporation reduces the payout ratio, grows at a slower rate, , or suffers a decline in its profit margin? Discuss each of these separately. ,c. Prepare a pro forma balance sheet for 2010 assuming that any external funds being acquired will be in the form of notes payable. , Disregard the information in part b in answering this question , (that is, use the original information and part a in constructing your pro forma balance sheet). , , , , , , , , , , , , , ,c. Balance Sheet—December 31, 2010 , (Dollars in Millions) , Cash Accounts Payable , Accounts Receivable Accruals , Inventory Notes Payable , Net Fixed Assets Long-Term Bonds , Common Stock , Retained Earnings , , Total Assets Total Liabilities , and Equity ,
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