9-6: Additional Funds Needed (AFN) Equation Method Problem 9-9 Financing Deficit Garlington Technologies Inc.'s 2015 financial statements are shown below: Balance Sheet as of December 31, 2015 Cash $ 180,000 Accounts payable $ 360,000 Receivables 360,000 Notes payable 156,000 Inventories 720,000 Line of credit 0 Total current assets $1,260,000 Accruals 180,000 Fixed assets 1,440,000 Total current liabilities $ 696,000 Common stock 1,800,000 Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000 Income Statement for December 31, 2015 Sales $3,600,000 3,279,720 Operating costs EBIT $ 320,280 Interest 18,280 Pre-tax earnings $ 302,000 120,800 Taxes (40%) Net income 181,200 Dividends $ 108,000 Suppose that in 2016 sales increase by 5% over 2015 sales and that 2016 dividends will increase to $142,000. Forecast the financial statements using the forecasted financial statement method. Assume the firm operated at full capacity in 2015. Use an interest rate of 12%, and assume that any new debt will be added at the end of the year (so forecast the interest expense based on the debt balance at the beginning of the year). Cash does not earn any interest income. Assume that the all new debt will be in the form of a line of credit. Round your answers to the nearest dollar. Do not round intermediate calculations. Garlington Technologies Inc. Pro Forma Income Statement December 31, 2016 Sales $ Operating costs $ EBIT $ Interest $ Pre-tax earnings $ Taxes (40%) $ Net income $ Dividends: $ Addition to RE: $ Garlington Technologies Inc. Pro Forma Balance Statement December 31, 2016 Cash $ Receivables ta Inventories ta Total current assets $ Fixed assets $ A Total assets Accounts payable $ Notes payable $ Accruals Total current liabilities $ Common stock $ Retained earnings $ #t Total liabilities and $ equity