Question

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:
  

INCOME STATEMENT
Sales			$	32,000,000
Costs				26,309,400
Taxable income			$	5,690,600
Taxes				1,991,710
Net income			$	3,698,890
Dividends	$	1,479,556
Addition to retained earnings		2,219,334

  

BALANCE SHEET
Assets				Liabilities and Equity
Current assets	$	7,360,000		Short-term debt	$	7,040,000
				Long-term debt		2,240,000
Fixed assets		18,560,000
				Common stock	$	6,070,000
				Accumulated retained earnings		10,570,000
				Total equity	$	16,640,000
Total assets	$	25,920,000		Total liabilities and equity	$	25,920,000

  
a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.)
  
External financing needed           $
  
b-1. Prepare the firm’s pro forma balance sheet for next year. (Do not round intermediate calculations.)
   

BALANCE SHEET
Assets				Liabilities and equity
Current assets	$			Short-term debt	$
Fixed assets				Long-term debt
				Common stock	$
				Accumulated retained earnings
				Total equity	$
Total assets	$			Total liabilities and equity	$

b-2. Calculate the external funds needed. (Do not round intermediate calculations.)
  
External financing needed           $

c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
  
Sustainable growth rate            %

Answer 1

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

EFN IS ROUNDED TO 2 DECIMALS. IF WE ROUND, IT WILL BE 1945833

BOND- Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins E AutoSum - Cut AC Wrap Text Calibri 11 General ECopy Fill Merge & Center Insert Delete Format Paste в IU* +.0 .00 Conditional Format Cell Sort & Find & $ % .00 0 Format Painter Clear Filter Select Formatting as Table Styles Clipboard Number Font Alignment Styles Cells Editing fox NH19 NV NH NI NJ NK NL NM NN NO NP NQ NR NS NT NU NW 1 optical scam 2 3 Assets/sales* change in sales - debt/sales* change in sales (PM x projected sales)* (1-d) . EFN = 4 5 Assets/sales 25920000/32000000 = where 0.8100 6 change in sales 32000000 x 25% = 7 8000000 projected sales 320000008000000 40000000 debt/sales 7040000/32000000 9 0.2200 Net income/sales 0.11559031 [3698890/32000000] 10 PM = [profit margin) 11 dividend/ net income 0.4000 1479556/3698890] 12 13 14 0.81 x 8000000 - 0.22 x 8000000 - (0.11559031 x 40000000)*(1-0.4) 15 EFN= 16 a EFN = 1945832.50 17 18 19 20 21 Sheet2 AFN BANKING NOTE S1S3 S4 S5 S6 D EUAC AW LIFE YIELD SPOT LP, IP, MRP, INFLATION WARRANT refund 4 CLEAN PRICE S10 BIDDING, UNDERWRITING + Rea erences: GB150 120% WA X 04:10 ENG 20-11-2019 LON00

BOND- Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins Σ AutoSum - Cut AC Wrap Text Calibri 11 General E Copy Fill Merge & Center Insert Delete Format Paste в IU* $ %, +.0 .00 Conditional Format Cell Sort & Find & .00 0 Format Painter Clear Filter Select Formatting as Table Styles Clipboard Font Alignment Number Styles Cells Editing fie NO36 NM NT NG NH NI NJ NK NL NN NO NP NQ NR NS NU 18 19 CALCULATION OF CURRENT YEAR RETAINED EARNINGS 40000000 x 0.11559031 net income 20 4623612.50 less dividend = 40% = 21 1849445.00 Addition to retained earnings 22 2774167.50 23 b-1 pro forma balance sheet 24 Liabilities & equity 25 Assets 7040000 1.25 = 7360000*1.25= 9200000 short term debt 26 8800000 current assets 18560000*1.25 fixed assets 23200000 long term debt 27 2240000 28 29 6070000 common stock retained earnings 30 13344167.50 [105700002774167.50] 31 32 ТOTAL 32400000 TOTAL 30454167.50 33 b-2 34 EFN TOTAL ASSETS -TOTAL LIABILITIES AND EQUITY 35 EFN 32400000- 30454167.50 36 EFN 1945832.50 37 38 Sheet2 NOTE S1S3 S60 YIELD SPOT EUAC AW LIFE S4 LP, IP, MRP, INFLATION AFN BANKING CLEAN PRICE S10 BIDDING, UNDERWRITING WARRANT refund S5 Rea erences: GC150 120% e WA X 04:18 ENG 20-11-2019

BOND- Microsoft Excel (Product Activation Failed) Review File Home Insert Page Layout Formulas Data View Add-Ins Σ AutoSum - Cut AC Wrap Text General Calibri 11 E Copy Fill Merge & Center Insert Delete Format Paste в IU* .0 .00 .00 0 Conditional Format Cell Sort & Find & % Format Painter Clear Filter Select Formatting as Table Styles Number Clipboard Font Alignment Styles Cells Editing fox NL51 NM NH NT NG NI NJ NK NL NN NO NP NQ NR NS NU 37 (ROE X b)/(1 -(ROE Х Ь)) 38 SUSTAINABLE GROWTH RATE = с 39 NET INCOME/EQUITY 40 ROE= 3698890/16640000 41 ROE = 42 22.228906% ROE= 43 DIVIDEND PAYOUT = 40%, SO RETENTION RATIO b 60% 44 45 |(22.228906%*60%)/ (1- (22.228906%*60%)) 46 SUSTAINABLE GROWTH RATE = 47 15.39% SUSTAINABLE GROWTH RATE = 48 49 50 51 52 53 54 55 56 57 Sheet2 erences: GC185 NOTE S1S3 S60 EUAC AW LIFE S4 YIELD SPOT LP, IP, MRP, INFLATION 4 AFN BANKING CLEAN PRICE S10 BIDDING, UNDERWRITING WARRANT refund S5 Rea 120% + WA X 04:22 ENG 20-11-2019