Award: 10 out of 10.00 points Show my answer The most recent financial statements for Schenkel Co. are shown here: 32.89 ± 1%
Income Statement Balance Sheet Sal es $ 16,400 Cur rent ass ets $ 11,200 Deb t $ 15,700 Cos ts 10,500 Fixe d ass ets 27,000 Equ ity 22,500 Tax able inco me $ 5,900 T otal $ 38,200 T otal $ 38,200 Tax es (40% ) 2,360 N et inco me $ 3,540 Assets and costs are proportional to sales. Debt and equity are not. The company maintains a constant 30 percent dividend payout ratio. No external financing is possible. What is the internal growth rate? (Do not round intermediate calculations. Enter your answer as a percent rounded 2 decimal places, e.g., 32.16.) Internal growth rate % Explanation: To calculate the internal growth rate, we first need to calculate the ROA, which is: ROA= NI / TA ROA= $3,540 / $38,200 ROA= .0927, or 9.27% The plowback ratio, b , is one minus the payout ratio, so: 6.94 ± 1%
b = 1 – .30 b = .70 Now we can use the internal growth rate equation to get: Internal growth rate = (ROA × b ) / [1 – (ROA × b )] Internal growth rate = [.0927(.70)] / [1 – .0927(.70)] Internal growth rate = .0694, or 6.94% 5. Award: 10 out of 10.00 points Show my answer The most recent financial statements for Fleury Inc., follow. Sales for 2015 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets and accounts payable increase spontaneously with sales. FLEURY, INC. 2014 Income Statement Sales $ 755,000 Costs 590,000 Other expenses 11,000 Earning s before interest and taxes $ 154,000 Interest paid 12,000 Taxable income $ 142,000 Taxes (40%) 56,800 Net income $ 85,200 Dividen ds $ 34,08 0 Addition to 51,12 0
retained earnings FLEURY, INC. Balance Sheet as of December 31, 2014 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 21,440 Accou nts payable $ 55,600 Accou nts receivabl e 33,760 Notes payable 14,800 Invent ory 70,720 Total $ 70,400 Total $ 125,920 Long- term debt $ 138,000 Owners’ equity Fixed assets Comm on stock and paid- in surplus $ 124,000 Net plant and equipme nt $ 270,000 Retain ed earnings 63,520 Total $ 187,520 Total assets $ 395,920 Total liabilities and owners’ equity $ 395,920 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) EFN $ Explanation: Assuming costs vary with sales and a 20 percent increase in sales, the pro forma 58,015 ± 0.1%
income statement will look like this: FLEURY INC. Pro Forma Income Statement Sale s $ 906,000 Cost s 708,000 Oth er expe nses 13,200 EBI T $ 184,800 Inter est 12,000 Taxa ble incom e $ 172,800 Taxe s (40%) 69,120 Net incom e $ 103,680 The payout ratio is constant, so the dividends paid this year is the payout ratio from last year times net income, or: Dividend s = ($34,080 / $85,200) ($103,680) Dividend s = $41,472 And the addition to retained earnings will be: Addition to retained earnings = $103,680 – 41,472 Addition to retained earnings = $62,208 The new retained earnings on the pro forma balance sheet will be: New retained = $63,520 + 62,208
earnings New retained earnings = $125,728 The pro forma balance sheet will look like this: FLEURY INC.
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