DON'T USE EXCEL

a) Suppose the firm is operating at full capacity and no new debt or equity is issued. Give the pro forma statements and the external financing needed to support the 20 percent growth rate in sales?

b) Suppose the firm was operating at only 80 percent capacity in 2008. What is EFN now?

NOTE: Interest expense will remain constant; the tax rate and the dividend pay-out rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales.

just solve B and explain every step

Exercise 4. [6] Suppose that Moose Tours, Inc., sales 2009 are projected to grow by 20% percent. Interest expense will remain constant; the tax rate and the dividend pay-out rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. MOOSE TOURS, INC. 2008 Income Statement a) Suppose the firm is operating at full capacity and no new debt or equity is issued. Give the pro forma statements and the external financing needed to support the 20 percent growth rate in sales? b) Suppose the firm was operating at only 80 percent capacity in 2008. What is EFN now? Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes Net income Dividends Addition to retained earnings $929,000 723,000 19.000 $187,000 14,000 $173,000 60,550 $112,450 $33,735 78,715 MOOSE TOURS, INC. Balance Sheet as of December 31, 2008 Assets Liabilities and Owners' Equity Current assets Current liabilities Cash $ 25,300 Accounts payable $ 68,000 Accounts receivable 40,700 Notes payable 17,000 Inventory 86,900 Total $ 85,000 Total $152,900 Long-term debt $158,000 Fixed assets Owners' equity Net plant and equipment 413,000 Common stock and paid-in surplus $140,000 Retained earnings 182,900 Total $322,900 Total assets $565,900 Total liabilities and owners' equity $565,900