Income Statement  
Income Statement Balance Sheet
Sales $9,500 Current assets $4,200 Current liabilities $2,700
Costs 6,700 Fixed assets 9,400 Long-tern debt 4,260
Taxable income $2,800 Equity 6,640
Taxes (24% ) 672 Total $13,600 Total $ 13,600
Assets, costs, and current liabilities are proportional to assets. Long-term debt and equity are not. The company maintains a constant 35 percent dividend payout ratio. As with every other firm in its industry, next year's sales are projected to increase by exactly 18 percent.
What is the external financing needed?
Homework Answers
Proforma Income Statement
| YEAR 1 | YEAR 2 | |
| Sales | $9,500 | $11,210 |
| (-)Costs | 6,700 | 7,906 |
| Taxable Income | $2,800 | $ 3,304 |
| (-)Taxes (@24%) | 672 | 792.96 |
| Net Income | $2,128 | $ 2,511.04 |
Dividends paid out = 35% x $2,511.04 = $878.86
Earnings Retained = 65% x $2,511.04 = $1,632.18
Proforma Balance Sheet
| Current Assets($4,200 x 1.18) | $ 4,956 | Current Liabilities($2,700 x 1.18) | $3,186 |
| Fixed Assets($9,400 x 1.18) | $11,092 | Long-Term Debt | $4,260 |
| Equity | $6,640 | ||
| Retained Earnings | $1,632.18 | ||
|
EFN[$16,048 - ($3,186 + $4,260 + $6,640 + $1,632.18)] |
$ 329.82 (Answer) |
||
| Total | $16,048 | Total | $16,048 |
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