Calculate the sustainable growth rate. Calculate the EFN and prepare pro forma income statements and balance sheets assuming growth at precisely this rate. Recalculate the ratios in the previous question. What do you observe?

a. Sustainable growth rate=

b. EFN=

c. Prepare pro formo income statement and balance sheet

d. recalculate rations

e. write a paragraph regarding what you observe

Income statement

Sales

COGS

Other expenses

Depreciation

EBIT

Interest

Taxable income

Taxes (40%)

Net income

Dividends

Add to RE

East Cost Yachts
2017 Balance Sheet
Current Assets
Cash and equivalents
Accounts receivable
Inventory
Other
Total current assets
Fixed assets
Total assets

Old Ratios: Yacht Industry Ratios
Ratio	Lower Quartile	Median	Upper Quartile	East Coast Yachts
Current ratio	0.86	1.51	1.97	1.01
Quick ratio	0.43	0.75	1.01	0.61
Total asset turnover	1.10	1.27	1.46	1.52
Inventory turnover	12.18	14.38	16.43	21.39
Receivables turnover	10.25	17.65	22.43	32.74
Debt ratio	0.32	0.56	0.61	0.42
Debt-equity ratio	0.83	1.13	1.44	0.93
Equity multiplier	1.83	2.13	2.44	-
Interest coverage	5.72	8.21	10.83	7.96
Profit margin	5.02%	7.48%	9.05%	7.51%
Return on assets	7.05%	10.67%	14.16%	11.44%
Return on equity	14.06%	19.32%	26.41%	0.00%

New Ratio calculation:
Ratio	Lower Quartile	Median	Upper Quartile	East Coast Yachts
Current ratio	0.86	1.51	1.97
Quick ratio	0.43	0.75	1.01
Total asset turnover	1.10	1.27	1.46
Inventory turnover	12.18	14.38	16.43
Receivables turnover	10.25	17.65	22.43
Debt ratio	0.32	0.56	0.61
Debt-equity ratio	0.83	1.13	1.44
Equity multiplier	1.83	2.13	2.44
Interest coverage	5.72	8.21	10.83
Profit margin	5.02%	7.48%	9.05%
Return on assets	7.05%	10.67%	14.16%
Return on equity	14.06%	19.32%	26.41%

Numbers given for equation:

East Cost Yachts			East Cost Yachts
2017 Income Statement			2017 Balance Sheet
Sales	$611,582,000		Current Assets			Current liabilities
Cost of Goods Sold	431,006,000		Cash and equivalents	$11,119,700		Accounts payable	$44,461,550
Selling, general & admin expenses	73,085,700		Accounts receivable	18,681,500		Accrued expenses	6,123,200
Depreciation	19,958,400		Inventory	20,149,650		Total current liabilities	$50,584,750
EBIT	$87,531,900		Other	1,172,200
Interest expense	11,000,900		Total current assets	$51,123,050
EBT	$76,531,000		Fixed assets			Long-term debt	$169,260,000
Taxes	30,612,400		Property, plant and equipment	$457,509,600		Total long-term liabilities	$169,260,000
Net Income	$45,918,600		Less accumulated depreciation	(113,845,900)
Dividends	$17,374,500		Net property, plant and equipment	$343,663,700
Retained Earnings	$28,544,100		Intangible assets and others	6,772,000		Stockholders' equity
			Total fixed assets	$350,435,700		Preferred stock	$1,970,000
						Common stock	37,583,700
						Capital surplus	28,116,300
						Accumulated retained earnings	161,564,000
						Less treasury stock	(47,520,000)
						Total equity	$181,714,000
			Total assets	$401,558,750		Total liabilities and shareholders' equity	$401,558,750