Corporate_Finance_9th_edition_Solutions_Manual_FINAL0

33735112450136760 dividends 41028 and the addition

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Unformatted text preview: ,900 + 91,478 New retained earnings = $274,378 The pro forma balance sheet will look like this: 15% Sales Growth: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ 29,095 46,805 99,935 175,835 474,950 Liabilities and Owners’ Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners’ equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners’ equity $ $ $ 78,200 17,000 95,200 158,000 $ $ $ 140,000 274,378 414,378 667,578 Total assets So the EFN is: $ 650,785 EFN = Total assets – Total liabilities and equity EFN = $650,785 – 667,578 EFN = –$16,793 At a 20 percent growth rate, and assuming the payout ratio is constant, the dividends paid will be: Dividends = ($33,735/$112,450)($136,760) Dividends = $41,028 And the addition to retained earnings will be: Addition to retained earnings = $136,760 – 41,028 Addition to retained earnings = $95,732 The new retained earnings on the pro forma balance sheet will be: New retained earnings = $182,900 + 95,732 New retained earnings = $278,632 40 The pro forma balance sheet will look like this: 20% Sales Growth: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ 30,360 48,840 104,280 183,480 495,600 Liabilities and Owners’ Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners’ equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners’ equity $ $ $ 81,600 17,000 98,600 158,000 $ $ $ 140,000 278,632 418,632 675,232 Total assets So the EFN is: $ 679,080 EFN = Total assets – Total liabilities and equity EFN = $679,080 – 675,232 EFN = $3,848 At a 25 percent growth rate, and assuming the payout ratio is constant, the dividends paid will be: Dividends = ($33,735/$112,450)($142,838) Dividends = $42,851 And the addition to retained earnings will be: Addition to retained earnings = $142,838 – 42,851 Addition to retained earnings = $99,986 The new retained earnings on the pro forma balance sheet will be: New retained earnings = $182,900 + 99,986 New retained earnings = $282,886 The pro forma balance sheet will look like this: 41 25% Sales Growth: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ 31,625 50,875 108,625 191,125 516,250 Liabilities and Owners’ Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners’ equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners’ equity $ $ $ 85,000 17,000 102,000 158,000 $ $ $ 140,000 282,886 422,886 682,886 Total assets So the EFN is: $ 707,375 EFN = Total assets – Total liabilities and equity EFN = $707,375 – 682,886 EFN = $24,489 25. The pro forma income statements for all three growth rates will be: MOOSE TOURS INC. Pro Forma Income Statement 20% Sales 30% Sales Growth Growth $1,114,800 $1,207,700 867,600 939,900 22,800 24,700 $224,400 $243,100 14,000 14,000 $210,400 $229,100 73,640 80,185 $136,760 $148,915 $41,028 95,732 $44,675 104,241 Sales Costs Other expenses EBIT Interest Taxable income Taxes (35%) Net income Dividends Add to RE 35% Sales Growth $1,254,150 976,050 25,650 $252,450 14,000 $238,450 83,458 $154,993 $46,498 108,495 At a 30 percent growth rate, and assuming the payout ratio is constant, the dividends paid will be: Dividends = ($33,735/$112,450)($148,915) Dividends = $44,675 And the addition to retained earnings will be: 42 Addition to retained earnings = $148,915 – 44,675 Addition to retained earnings = $104,241 The new addition to retained earnings on the pro forma balance sheet will be: New addition to retained earnings = $182,900 + 104,241 New addition to retained earnings = $287,141 The new total debt will be: New total debt = .7556($427,141) New total debt = $321,447 So, the new long-term debt will be the new total debt minus the new short-term debt, or: New long-term debt = $321,447 – 105,400 New long-term debt = $216,047 The pro forma balance sheet will look like this: Sales growth rate = 30% and debt/equity ratio = .7526: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment $ $ 32,890 52,910 112,970 198,770 536,900 Liabilities and Owners’ Equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners’ equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners’ equity $ $ 88,400 17,000 105,400 216,047 $ $ $ 140,000 287,141 427,141 748,587 Total assets So the excess debt raised is: $ 735,670 Excess debt = $748,587 – 735,670 Excess debt = $12,917 At a 35 percent growth rate, and assuming the payout ratio is constant, the dividends paid will be: Dividends = ($33,735/$112,450)($154,993) Dividends = $46,498 43 And the addition to retained earnings will be: Addition to retained earnings = $154,993 – 46,498 Addition to retained earnings = $108,495 The new retained earnings on the pro forma balance sheet will be: New retained earnings = $182,900 + 108,495 New retained earnings = $291,395 The new total debt will be: New total debt = .75255($431,395) New total debt = $324,648 So, the new long-term debt will be the new total debt minus the...
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