calculate the following economics please
The pro forma income statements for all three growth rates will be: MOOSE TOURS INC. Pro Forma Income Statement 20% Sales 30% Sales 35% Sales Growth Growth Growth Sales $1,114,800 $1,207,700 $1,254,150 Costs 867,600 939,900 976,050 Other expenses 22,800 24,700 25,650 EBIT $224,400 $243,100 $252,450 Interest 14,000 14,000 14,000 Taxable income $210,400 $229,100 $238,450 Taxes (35%) 73,640 80,185 83.458 Net income $136,760 $148,915 $154.993 Dividends $41,028 $44,675 $46,498 Add to RE 95,732 104,241 108.495 At a 30 percent growth rate, and assuming the payout ratio is constant, the dividends paid will be: Dividends = ($30,810/$102,700)($135,948) Dividends = $40,784 And the addition to retained earnings will be:3 The pro forma income statements for all three growth rates will be: MOOSE TOURS INC. Pro Forma Income Statement 15 % Sales 20% Sales 25% Sales Growth Growth Growth Sales $1,068,350 $1,114,800 $1,161,250 Costs 831,450 867,600 903,750 Other expenses 21.850 22.800 23.750 EBIT $215,050 $224,400 $233,750 Interest 14.000 14.000 14.000 Taxable income $201,050 $210,400 $219,750 Taxes (35%) 70.368 73.640 76.913 Net income $130.683 $136.760 $142.838 Dividends $39,205 $41,028 $42,851 Add to RE 91,478 95,732 99,986 We will calculate the EFN for the 15 percent growth rate first. Assuming the payout ratio is constant, the dividends paid will be: Dividends = ($33,735/$1 12,450)($130,683) Dividends = $39,205 And the addition to retained earnings will be:The D/E ratio of the company is: D/E = ($85,000 + 158,000) / $322,900 D/E = .7526 So the new total debt amount will be: New total debt = .7526($418,632) New total debt = $315,044 This is the new total debt for the company. Given that our calculation for EFN is the amount that must be raised externally and does not increase spontaneously with sales, we need to subtract the spontaneous increase in accounts payable. The new level of accounts payable will be, which is the current accounts payable times the sales growth, or: Spontaneous increase in accounts payable = $68,000(.20) Spontaneous increase in accounts payable = $13,600 CHAPTER 4 B-45 This means that $13,600 of the new total debt is not raised externally. So, the debt raised externally. which will be the EFN is: EFN = New total debt - (Beginning LTD + Beginning CL + Spontaneous increase in AP) EFN = $315,044- ($158,000 + 68,000 + 17,000 + 13,600) = $58,444 The pro forma balance sheet with the new long-term debt will be:Assuming costs vary with sales and a 20 percent increase in sales, the pro forma income statement will look like this: MOOSE TOURS INC. Pro Forma Income Statement Sales $ 1,114,800 Costs 867,600 Other expenses 22.800 EBIT $ 224,400 Interest 14.000 Taxable income $ 210,400 Taxes(35%) 73.640 Net income 136.760 The payout ratio is constant, so the dividends paid this year is the payout ratio from last year times net income, or: Dividends = ($33,735/$112,450)($136,760) Dividends = $41,028 And the addition to retained earnings will be: Addition to retained earnings = $136,760 -41,028 Addition to retained earnings = $95,732 The new retained earnings on the pro forma balance sheet will be: New retained earnings = $182,900 + 95,732 New retained earnings = $278,632 The pro forma balance sheet will look like
