CHAPTER 4-1 - The payout ratio is constant, so the...

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Sales increase = ($7,424 – 6,300) / $6,300 Sales increase = .18 or 18% Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: Pro forma income statement Pro forma balance sheet Sales $ 7,434 Assets $ 21,594 Debt $ 12,400 Costs 4,590 Equity 8,744 Net income $ 2,844 Total $ 21,594 Total $ 21,144 If no dividends are paid, the equity account will increase by the net income, so: Equity = $5,900 + 2,844 Equity = $8,744 So the EFN is: EFN = Total assets – Total liabilities and equity EFN = $21,594 – 21,144 = $450 4. An increase of sales to $21,840 is an increase of: Sales increase = ($21,840 – 19,500) / $19,500 Sales increase = .12 or 12% Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: Pro forma income statement Pro forma balance sheet Sales $ 21,840 Assets $109,760 Debt $52,500 Costs 16,800 Equity 79,208 EBIT 5,040 Total $109,760 Total $99,456 Taxes (40%) 2,016 Net income $ 3,024
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Unformatted text preview: The payout ratio is constant, so the dividends paid this year is the payout ratio from last year times net income, or: Dividends = ($1,400 / $2,700)($3,024) Dividends = $1,568 The addition to retained earnings is: Addition to retained earnings = $3,024 1,568 Addition to retained earnings = $1,456 And the new equity balance is: Equity = $45,500 + 1,456 Equity = $46,956 So the EFN is: EFN = Total assets Total liabilities and equity EFN = $109,760 99,456 EFN = $10,304 5. Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: Pro forma income statement Pro forma balance sheet Sales $4,830.00 CA $4,140.00 CL $2,145.00 Costs 3,795.00 FA 9,085.00 LTD 3,650.00 Taxable income $1,035.00 Equity 6,159.86 Taxes (34%) 351.90 TA $13,225.00 Total D&E $12,224.86 Net income $ 683.10 The payout ratio is 40 percent, so dividends will be: Dividends = 0.40($683.10) Dividends = $273.24...
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This note was uploaded on 07/15/2010 for the course FINANCE 318 taught by Professor Spurlin during the Spring '08 term at LA Tech.

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