Income Statement Sales $2, 100 (508 of average assets) Costs 1,050 (508 of sales) Interest 20 (31 of debt at start of year) Pretax profit $1, 030 Tax…

The below table summarizes the 2017 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 15% increase in sales and costs in 2018. The ratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 3% of debt at the start of the year.

b Debt at the end of 2016 was $670,000.

(Enter your answer in thousands.)

b. If the company pays out 50% of net income as dividends, how much cash will Drake need to raise in the capital markets in 2018? (Enter your answer in thousands.)

c. If Drake is unwilling to make an equity issue, what will be the debt ratio at the end of 2018? (Round your answer to 2 decimal places.)

  • Attachment 1
  • Attachment 2

Income StatementSales$2, 100 (508 of average assets)Costs1,050 (508 of sales)Interest20(31 of debt at start of year)Pretax profit$1, 030Tax206(201 of pretax profit)Net incomeS824

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