ABC Corporation

Current Financial Statements (in millions of $)

Income Statement

Sales 1800

Costs 1500

Taxable income 300

Taxes (34%) ??

Net income ??

Dividend (30% of net income)

Earnings retained ??

Balance Sheet

Cash 210

A/R 730

Inventory 1100

PPE 2060

Total Assists ??

A/P 410

N/P 130

LTD 420

C/S 2000

R/E 1140

Total L/E ??

Sales are expected to increase by 12%.

Assumptions concerning the income statement:

Costs are a constant fraction of sales.

The tax rate is not expected to change.

Dividend payout ratio will remain constant.

• In the income statement calculate the net income, dividends and retained earnings.
• You are required to prepare Pro Forma Financial Statements.
• Attach Excel sheet with the problem solution