1. Calculate all of the ratios listed in the industry table for East Coast Yachts.2. Compare the performance of East Coast Yachts to the industry as a whole. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Sup-pose you create an inventory ratio calculated as inventory divided by current liabilities. How do you interpret this ratio? How does East Coast Yachts compare to the industry average?3. Calculate the sustainable growth rate of East Coast Yachts. Calculate EFNand prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe?4. East Coast Yachts is unlikely to be willing to raise external equity capital, in part because the owners dont want to dilute their existing ownership and control positions. However, East Coast Yachts is planning for a growth rate of 20 percent next year. What are your conclusions and recommendations about the feasibility of East Coasts expansion plans?5. Most assets can be increased as a percentage of sales. For example, cash can be increased by any amount. However, fixed assets often must be increased in specific amounts because it is impossible to buy part of a new plant or machine. In this case, a company has a staircase or lumpy fixed cost structure. Assume that East Coast Yachts is currently producing at 100 percent of capacity. As a result, to expand production, the company must set up an entirely new line at a cost of $30 million. Calculate the new EFN with this assumption. What does this imply about capacity utilization for East Coast Yachts next year?

EAST COAST YACHTS 2019 Income Statement Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) interest Taxable income Taxes (215 Net Income Dividends Additions to retained earnings $231.900.000 170.157.000 27.711.200 7,566.900 $ 26,464,900 4.170.100 $ 22.294.800 4,681.908 $ 17,612,892 $7.925,000 $9,687,892 EAST COAST YACHTS Balance Sheet as of December 31, 2019 Assets Liabilities & Equity Current assets Current liabilities Cash $ 3.614.200 Accounts payable $6.977.700 Accounts receivable 6,501,900 Notes payable 15,776,900 Inventory 7.290, 100 Total $ 22.754.600 Total 17,406,200 Fixed assets Long-term debt $ 40,100.000 Net plant and equipment $111,629,300 Shareholders' equity Common stock $ 6,140,000 Retained earnings 60,040,900 Total equity $ 66,180.900 Total assets $129,035,500 Total abilities and equity $129,035,500 Yacht Industry Ratios Lower Quartile 50 21 68 6.85 6.27 44 79 1.79 5.18 4.05% 6.05% Median 1.43 38 85 9.15 11.81 52 1.08 208 8.06 6.98% 10.53% 16,54% Upper Quartile 1.89 .62 1.38 16.13 21.45 Current ratio Ouick ratio Total asset turnover Inventory turnover Receivables turnover Debt ratio Debt-equity ratio Equity multiplier Interest coverage Profit margin Return on assets Return on equity 61 1.56 256 9.83 9.87% 15.83% 28.14% EAST COAST YACHTS 2019 Income Statement Sales Cost of goods sold Other expenses Depreciation Earnings before interest and taxes (EBIT) interest Taxable income Taxes (215 Net Income Dividends Additions to retained earnings $231.900.000 170.157.000 27.711.200 7,566.900 $ 26,464,900 4.170.100 $ 22.294.800 4,681.908 $ 17,612,892 $7.925,000 $9,687,892 EAST COAST YACHTS Balance Sheet as of December 31, 2019 Assets Liabilities & Equity Current assets Current liabilities Cash $ 3.614.200 Accounts payable $6.977.700 Accounts receivable 6,501,900 Notes payable 15,776,900 Inventory 7.290, 100 Total $ 22.754.600 Total 17,406,200 Fixed assets Long-term debt $ 40,100.000 Net plant and equipment $111,629,300 Shareholders' equity Common stock $ 6,140,000 Retained earnings 60,040,900 Total equity $ 66,180.900 Total assets $129,035,500 Total abilities and equity $129,035,500 Yacht Industry Ratios Lower Quartile 50 21 68 6.85 6.27 44 79 1.79 5.18 4.05% 6.05% Median 1.43 38 85 9.15 11.81 52 1.08 208 8.06 6.98% 10.53% 16,54% Upper Quartile 1.89 .62 1.38 16.13 21.45 Current ratio Ouick ratio Total asset turnover Inventory turnover Receivables turnover Debt ratio Debt-equity ratio Equity multiplier Interest coverage Profit margin Return on assets Return on equity 61 1.56 256 9.83 9.87% 15.83% 28.14%