solution
The Optical Scam Company has forecast a sales growth rate of 20 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here:
| INCOME STATEMENT | |||||
| Sales | $ | 32,400,000 | |||
| Costs | 28,531,000 | ||||
| Taxable income | $ | 3,869,000 | |||
| Taxes | 1,354,150 | ||||
| Net income | $ | 2,514,850 | |||
| Dividends | $ | 1,005,940 | |||
| Addition to retained earnings | 1,508,910 | ||||
| BALANCE SHEET | |||||||
| Assets | Liabilities and Equity | ||||||
| Current assets | $ | 7,400,000 | Short-term debt | $ | 7,128,000 | ||
| Long-term debt | 3,969,000 | ||||||
| Fixed assets | 17,872,000 | ||||||
| Common stock | $ | 2,941,000 | |||||
| Accumulated retained earnings | 11,234,000 | ||||||
| Total equity | $ | 14,175,000 | |||||
| Total assets | $ | 25,272,000 | Total liabilities and equity | $ | 25,272,000 | ||
a. Calculate the external funds needed for next year using the equation from the chapter. (Do not round intermediate calculations.)
External financing needed $
b-1. Prepare the firm’s pro forma balance sheet for next year. (Do not round intermediate calculations.)
| BALANCE SHEET | |||||||
| Assets | Liabilities and equity | ||||||
| Current assets | $ | Short-term debt | $ | ||||
| Fixed assets | Long-term debt | ||||||
| Common stock | $ | ||||||
| Accumulated retained earnings | |||||||
| Total equity | $ | ||||||
| Total assets | $ | Total liabilities and equity | $ | ||||
b-2. Calculate the external funds needed. (Do not round intermediate calculations.)
External financing needed $
c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Sustainable growth rate?
Save your time - order a paper!
Get your paper written from scratch within the tight deadline. Our service is a reliable solution to all your troubles. Place an order on any task and we will take care of it. You won’t have to worry about the quality and deadlines
Order Paper Now"Looking for a Similar Assignment? Get Expert Help at an Amazing Discount!"
