East Coast Yachts

2020 Income Statement

Sales

$550,424,000

Costs of goods sold

397,185,000

Selling, general, and administrative

65,778,000

Depreciation

17,963,000

EBIT

$69,498,000

Interest expense

9,900,000

EBT

$59,598,000

Taxes (25%)

14,899,500

Net income

$44,698,500

Dividends

$19,374,500

Retained earnings

25,324,000

East Coast Yachts

2020 Income Statement

Sales

$550,424,000

Costs of goods sold

397,185,000

Selling, general, and administrative

65,778,000

Depreciation

17,963,000

EBIT

$69,498,000

Interest expense

9,900,000

EBT

$59,598,000

Taxes (25%)

14,899,500

Net income

$44,698,500

Dividends

$19,374,500

Retained earnings

25,324,000

1.(Excel) Calculate the sustainable growth rate for East Coast Yachts.

a.Calculate external funds needed

b.Prepare pro forma income statement and balance sheet using this sustainable growth rate

c.Do you obtain the same numbers of EFN from part a and part b? What source of financing should East Coast Yachts use?

d.Recalculate the ratios in the previous question. What do you observe?