ANSWER ALL THE FOLLOWING

1. XYZ Corporation financial statements for the most recent year are as follows:

XYZ Corporation Income Statement		XYZ Corporation Balance Sheet
Sales	$72,500	Current Assets	$35,300	Current Liabilities
Less : Costs Less: Depreciation	$31,000 9,250			A/Payable	$ 8,000
EBIT	$ 32,250			Notes payable	$ 4,300
Less: Interest paid	$ 9,250			Total	$ 12,300
Taxable Income Less: Taxes (40%) Net Income	$ 23,000 9,200 13,800	Fixed Assets	$57,500	Long-term debt Equity	$25,500 55,000
Dividends (60%)	$ 8,280
Retained Earnings	$ 5,520			Total
		Total Assets	$92,800	Total Liab & Equity	$ 92,800

A 15 % growth rate in sales is projected. Assuming:

• costs, all assets and A/Payable vary with sales,
• others items in balance sheet do not vary with sales,
• dividend payout ratio is constant.
• Tax rate is constant.

1. Prepare the following pro forma financial statements (3 marks)

xyz Corporation Pro forma Income Statement		xyz Corporation Pro forma Balance Sheet
Sales		Current Assets		Current Liabilities
Less : Costs Less: Depreciation				A/Payable
EBIT Less: Interest paid				Notes payable
Taxable Income Less: Taxes (40%)				Total Current Liabilities
Net Income				Long-term debt
Dividends ( )		Fixed Assets		Equity
Retained Earnings		-- TOTAL ASSETS		TOTAL LIAB & EQUITY

2. What is the external financing needed? (1 mark)

(1 mark)

3. What are the ways you would suggest for the firm to finance its external fund requirement?