CHAPTER 4-9 - The pro forma balance sheet will look like...

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Internal growth rate = .0660 or 6.60% Using the formula ROA × b, and beginning of period assets: Internal growth rate = .0814 × .8684 Internal growth rate = .0707 or 7.07% 25. Assuming costs vary with sales and a 20 percent increase in sales, the pro forma income statement will look like this: MOOSE TOURS INC. Pro Forma Income Statement Sales $ 1,114,800 Costs 867,600 Other expenses 22,800 EBIT $ 224,400 Interest 14,000 Taxable income $ 210,400 Taxes(35%) 73,640 Net income $ 136,760 The payout ratio is constant, so the dividends paid this year is the payout ratio from last year times net income, or: 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
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Unformatted text preview: The pro forma balance sheet will look like this: MOOSE TOURS INC. Pro Forma Balance Sheet Assets Liabilities and Owners Equity Current assets Current liabilities Cash $ 30,360 Accounts payable $ 81,600 Accounts receivable 48,840 Notes payable 17,000 Inventory 104,280 Total $ 98,600 Total $ 183,480 Long-term debt 158,000 Fixed assets Net plant and Owners equity equipment 495,600 Common stock and paid-in surplus $ 140,000 Retained earnings 278,632 Total $ 418,632 Total liabilities and owners Total assets $ 679,080 equity $ 675,232 So the EFN is: EFN = Total assets Total liabilities and equity EFN = $679,080 675,232 EFN = $3,848 26. First, we need to calculate full capacity sales, which is: Full capacity sales = $929,000 / .80 Full capacity sales = $1,161,250 The capital intensity ratio at full capacity sales is:...
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