2. The projection for the coming year is a 25% increase in sales Income statement Sales 1000 Costs 833 Taxable incor 167 Tax (21%) 35 Net Income 132 Dividends 44 Add to RE 88 (a) Assume proportion of cost to sale is the same and find the pro forma income statement. Find the projected dividend and addition to RE using the dividend payout and retention ratios. o forma income stateme Sales Costs Taxable income Tax (21%) Net Income Dividends Add to RE Lets assume some items vary directly with sales and others don't for our projection for the balance sheet. Balance Sheet Assets Liabilities and Owners' equity $ % of sales $ % of sales Current assets Current liabilities Cash $ 160 16% accounts payable $ 300 30% Accounts rec $ 440 44% notes payable $ 100 na Inventory $ 600 60% Total $ 400 Total $ 1,200 120% Long-term debt $ 800 na Fixed assets Owners' equity Net plant & $ 1,800 180% Common stock & paid-in surplus $ 800 na Retained earnings $ 1,000 Total $ 1,800 Total assets $3,000 300% Total liabilities and equity $ 3,000 na (b) Find the pro forma balance sheet under this assumption Pro forma Balance Sheet Assets Liabilities and Owners' equity $ % of sales change $ % of sales change Current assets Current liabilities Cash 16% accounts payable 30% Accounts receivable notes payable na Inventory 60% Total Total 120% Long-term debt na Fixed assets Owners' equity Net plant & equipment 180% Common stock & paid-in surplus na Retained earnings na Total na Total assets 300% Total liabilities and equity na na na na 44% na (c) Suppose management decides to borrow the EFN and decide to maintain the change in NWC=0 (d) Suppose the firms was actually operating only at 70% capacity. What would be the full-capacity sales? What happens to EFN (e) Suppose the firms was actually operating only at 90% capacity. What would be the full-capacity sales? What happens to EFN (f) Given the info above, what is the capital intensity ratio at full capacity? 2. The projection for the coming year is a 25% increase in sales Income statement Sales 1000 Costs 833 Taxable incor 167 Tax (21%) 35 Net Income 132 Dividends 44 Add to RE 88 (a) Assume proportion of cost to sale is the same and find the pro forma income statement. Find the projected dividend and addition to RE using the dividend payout and retention ratios. o forma income stateme Sales Costs Taxable income Tax (21%) Net Income Dividends Add to RE Lets assume some items vary directly with sales and others don't for our projection for the balance sheet. Balance Sheet Assets Liabilities and Owners' equity $ % of sales $ % of sales Current assets Current liabilities Cash $ 160 16% accounts payable $ 300 30% Accounts rec $ 440 44% notes payable $ 100 na Inventory $ 600 60% Total $ 400 Total $ 1,200 120% Long-term debt $ 800 na Fixed assets Owners' equity Net plant & $ 1,800 180% Common stock & paid-in surplus $ 800 na Retained earnings $ 1,000 Total $ 1,800 Total assets $3,000 300% Total liabilities and equity $ 3,000 na (b) Find the pro forma balance sheet under this assumption Pro forma Balance Sheet Assets Liabilities and Owners' equity $ % of sales change $ % of sales change Current assets Current liabilities Cash 16% accounts payable 30% Accounts receivable notes payable na Inventory 60% Total Total 120% Long-term debt na Fixed assets Owners' equity Net plant & equipment 180% Common stock & paid-in surplus na Retained earnings na Total na Total assets 300% Total liabilities and equity na na na na 44% na (c) Suppose management decides to borrow the EFN and decide to maintain the change in NWC=0 (d) Suppose the firms was actually operating only at 70% capacity. What would be the full-capacity sales? What happens to EFN (e) Suppose the firms was actually operating only at 90% capacity. What would be the full-capacity sales? What happens to EFN (f) Given the info above, what is the capital intensity ratio at full capacity