Answer Happy

Digia, Inc. 2021 Income Statement ($ in millions) Net sales $2,395,000 Less: Cost of goods sold 1,495,000 Less: Depreciation expense 25,000 Less: Other expenses 95,000 Earnings before interest and taxes 780,000 Less: Interest paid 120,000 Taxable Income S660,000 Less: Taxes (40%) 264.000 Net income $396,000 Dividends S 316,800 Additions to Retained Earnings S 79,200 Digia, Inc. 2020 and 2021 Balance Sheets (S in millions) 2020 2021 2020 2021 Cash $ 75,000 $ 71,000 Accounts payable $ 170,000 S141,500 Accounts rec. 125,000 145,000 Notes payable 6.000 6,500 Inventory 155.000 135.000 Total S 176,000 S 148.000 Total S 355.000 S 351.000 Long-term debt 545,000 540,300 Net fixed assets 1.100.000 1.150,500 Common stock 520,700 520,700 Retained earnings 213.300 292.500 Total assets $1.455,000 $1.501.500 Total liab.& equity $1,455,000 S1.501.500
2. Use the financial statements above for Digia, Inc. and draw pro-forma statements for the year 2022. Sales are projected to grow by 12 percent. Costs of goods sold, depreciation expense, other expenses, current assets, and accounts payable increase spontaneously with sales. Interest expense will remain constant. Dividend payout amount and the tax rate will remain constant. If the firm is operating at 80% of its capacity and no new debt or equity is issued. What is the firm's full capacity sales? How much is the external financing needed to support the 12 percent growth rate in sales?