Krogh Lumber: Balance Sheet as of December 31, 2016 (Thousands of Dollars)

Cash $1,800 Accounts payable $7,200

Receivables 10,800 Notes payable 3,472

Inventories 12,600 Accrued liabilities 2,520

Total current assets $25,200 Total current liabilities $13,192

Mortgage bonds 5,000

Net fixed assets 21,600 Common stock 2,000

Retained earnings 26,608

Total assets $46,800 Total liabilities and equity $46,800

Krogh Lumber: Income Statement for December 31, 2016 (Thousands of Dollars)

Sales $36,000

Operating costs including depreciation 30,783

Earnings before interest and taxes $5,217

Interest 1,017

Earnings before taxes $4,200

Taxes (40%) 1,680

Net income $2,520

Dividends (60%) $1,512

Addition to retained earnings $1,008

Assume that the company was operating at full capacity in 2016 with regard to all items except fixed assets; fixed assets in 2016 were being utilized to only 65% of capacity. By what percentage could 2017 sales increase over 2016 sales without the need for an increase in fixed assets? Round your answer to two decimal places.

%

Now suppose 2017 sales increase by 25% over 2016 sales. Assume that Krogh cannot sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its operating costs/sales ratio to 84% and increase its total liabilities-to-assets ratio to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2017 forecasted interest-bearing debt as notes payable, and it will issue bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 10.5%. Any stock issuances or repurchases will be made at the firm's current stock price of $40. Develop Krogh's projected financial statements. What are the balances of notes payable, bonds, common stock, and retained earnings? Round your answers to the nearest hundredth of thousand of dollars.

Krogh Lumber Pro Forma Income Statement December 31, 2017 (Thousands of Dollars)

2016 2017

Sales $36,000 $?

Operating costs (includes depreciation) 30,783

EBIT $5,217 $?

Interest expense 1,017

EBT $4,200 $

Taxes (40%) 1,680

Net Income $2,520 $?

Dividends $1,512 $?

Addition to RE $1,008 $?

Krogh Lumber Pro Forma Balance Statement December 31, 2017 (Thousands of Dollars)

2016 2017

Assets

Cash $1,800 $?

Accounts receivable 10,800

Inventories 12,600

Fixed assets 21,600

Total assets $46,800 $?

Liabilities and Equity

Payables + accruals $9,720 $?

Short-term bank loans 3,472

Total current liabilities $13,192 $?

Long-term bonds 5,000

Total liabilities $18,192 $?

Common stock 2,000

Retained earnings 26,608

Total common equity $28,608 $?

Total liab. and equity $46,800 $?