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Chapter 4- book problems- fall 2005

# Chapter 4- book problems- fall 2005 - Chapter 4 Homework...

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Chapter 4 – Homework problems 1. Proforma Balance Sheet Assets = 9,790 Debt = 5610 Equity = 4180 Total 9,790 9790 If sales increases by 10%, NI will also increase by 10% NI = \$3,850 Equity = 3800 + Additions to RE 4180 = 3800+ Additions to RE Additions to RE = 380 NI = Dividends paid + Additions to RE 3850 = Dividends paid + 380 Dividends paid = 3470 2. NI = 3850; Dividends paid = 1925; Addition to RE = 1925 Proforma balance sheet Asset 9790 Debt = 5,100 Equity=(Beg Equity +RE) 5,725 Total 9790 10,825 EFN = Increase in assets – Increase in liabilities = - 1035 There are surplus funds to the extent of \$1035 3. Proforma income Statement Balance Sheet *Sales = 5192 Asset 15812 Debt = 9100 Costs = 3168 Equity = 6324 NI = 2024 Total 15812 15424 EFN = 15812-15424 = \$388 *Growth in sales = (5192/4400) - 1 = 18%

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4. Proforma Income statement Profoma Balance Sheet *Sales 23,040 Assets 111,600 Debt 20400 Costs 18,660 Equity 74335 Taxable Inc. 4380 Tax(34%) 1489 Total 111,600 94735 NI 2,891 EFN = 111600 – 94735 = 16865 Dividend payout ratio is = 963.60/2409 = 40% and the retention ratio is 60% Addition to RE= 2891*. .60= \$1734.60 *Growth in sales = (23040/19,200)-1= 20% 5. Projected sales next year: \$4,140 Projected NI 531.30 Dividends(50% of NI) 265.65 Retained earnings 265.65 Required increase in total assets = 9660 Increase in CL = 1058 LT debt 1840 Equity 5,905.65 Total 8803.65 EFN = 9660-8803.65 = 856.35 6. To calculate the internal growth rate, we first need to calculate the ROA, which is: ROA = NI / TA ROA = \$2,327 / \$38,000 ROA = .0612 or 6.12% The plowback ratio, b, is one minus the payout ratio, so: b = 1 – .20 b = .80
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Chapter 4- book problems- fall 2005 - Chapter 4 Homework...

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