Question
he most recent financial statements for Retro Machine, Inc., follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant;
he most recent financial statements for Retro Machine, Inc., follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. |
RETRO MACHINE, INC. 2020 Income Statement | ||||||
Sales | $ | 767,000 | ||||
Costs | 623,000 | |||||
Other expenses | 31,000 | |||||
Earnings before interest and taxes | $ | 113,000 | ||||
Interest paid | 15,600 | |||||
Taxable income | $ | 97,400 | ||||
Taxes (24%) | 23,376 | |||||
Net income | $ | 74,024 | ||||
Dividends | $ | 23,440 | ||||
Addition to retained earnings | 50,584 | |||||
RETRO MACHINE, INC. Balance Sheet as of December 31, 2020 | |||||||
Assets | Liabilities and Owners Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 25,640 | Accounts payable | $ | 63,000 | ||
Accounts receivable | 35,100 | Notes payable | 18,800 | ||||
Inventory | 71,780 | Total | $ | 81,800 | |||
Total | $ | 132,520 | Long-term debt | $ | 115,000 | ||
Owners equity | |||||||
Fixed assets | Common stock and paid-in surplus | $ | 114,000 | ||||
Net plant and equipment | $ | 224,000 | Retained earnings | 45,720 | |||
Total | $ | 159,720 | |||||
Total assets | $ | 356,520 | Total liabilities and owners equity | $ | 356,520 | ||
What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) |
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