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Ch4_Solutions

Ch4_Solutions - Finance 323 Chapter 4 Homework Solutions 1...

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Finance 323 Chapter 4 Homework Solutions 1. Sales Increase = 7,200.00 / 6,720.00 = 1.071428571 – 1.00 = 0.071428571 = 7.14% 1a. Pro Forma Income Statement Sales 7,200.00 Costs 4,410.00 (4,116.00 x 1.071428571) Net Inc 2,790.00 Pro Forma Net Income = 2,790.00 1b. Pro Forma Total Assets = 32,200.00 x 1.071428571 = 34,500.00 1c. Pro Forma Equity Beginning Equity 11,060.00 + Increase in Retained Earnings 2,790.00 (There are no dividends, all net income is reinvested) Pro Forma Equity 13,850.00 Pro Forma Equity = 13,850.00 1d. External Funds Needed: Pro Forma Balance Sheet Balance Sheet Assets 34,500.00 Debt 21,140.00 Equity 13,850.00 Total 34,990.00 EFN -490.00 Total 34,500.00 Total 34,500.00 External Funds Needed = -\$490.00 2a. Pro Forma Income Statement Sales 10,437.00 Cost 9,555.00 Taxable Income 882.00 Tax Rate 30.00% Taxes 264.60 Net Income 617.40 Sales = 9,940 x (1 + 0.050) Cost = 9,100 x (1 + 0.050) Tax = 882.00 x 0.30 2b. Pro Forma Dividends: 216.09 (Net Inc x Div Payout Ratio = 617.40 x 0.35) 2c. Pro Forma Increase in Retained Earnings: 401.31 (Net Income – Dividends = 617.40 – 216.09) 1 of 5

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