18-3)

Executive Fruits financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 10%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs.

a.Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands).(Enter your answers in thousands.)

Base Case20% Growth10% GrowthINCOME STATEMENTRevenue$9,500$$Cost of goods sold8,550EBIT$950$$Interest190Earnings before taxes$760$$State and federal tax304Net income$456$$Dividends304Retained earnings$152$$BALANCE SHEETAssetsNet working capital$950$$Fixed assets3,800Total assets$4,750$$Liabilities and shareholders' equityLong-term debt$1,900$$Shareholders' equity2,850Total liabilities and shareholders' equity$4,750$$Required external financing$$

b.Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet.(Enter your answers in thousands.)

BALANCE SHEETBase Case20% Growth10% GrowthAssetsNet working capital$950$$Fixed assets3,800Total assets$4,750$$Liabilities and shareholders' equityLong-term debt$1,900$$Shareholders' equity2,850Total liabilities and shareholders' equity$4,750$$