Liabilities and Equity Current liabilities $10,000,000 Accounts payable Notes payable 20,000,000 Total current liabilities $30,000,000 Long-term debt $30,000,000 $60,000,000 Total liabilities Shareholders' equity Common stock $80,000,000 60,000,000 Accumulated retained earnings Total equity $140,000,000 Total liabilities and equity $200,000,000 a) Prepare pro forma income statement and balance sheet for next year. Assume that sales, costs, current assets (cash, accounts receivable, and inventory), fixed assets, and current liabilities (accounts payable and notes payable) grow at the sales growth rate of 15 percent. Also assume that depreciation, interest, long-term debt, common stock, dividend payout ratio, and retention ratio remain the same for next year. Compute external fund needed (EFN). b) Calculate the sustainable growth rate of the firm using the current (not pro forma) financial statements. 1. Firm Q expects a 15 percent sales growth rate for next year. The tax rate is 25 percent. The current end-of-the-year financial statements for the firm are shown below: Firma 20XX Income Statement Sales $300,000,000 Costs Depreciation Earnings before interest and taxes (EBIT) Interest (240,000,000) (10,000,000) $50,000,000 (5,000,000) $45,000,000 (11,250,000) $33,750,000 Taxable income Taxes at 25% Net income Dividends Additions to retained earnings $18,562,500 $15,187,500 Firm Q Balance Sheet as of December 31, 20XX Assets Current assets Cash $15,000,000 Accounts receivable 25,000,000 Inventory 10,000,000 Total current assets $50,000,000 Fixed assets Net plant and equipment $150,000,000 Total assets $200,000,000 Liabilities and Equity Current liabilities $10,000,000 Accounts payable Notes payable 20,000,000 Total current liabilities $30,000,000 Long-term debt $30,000,000 $60,000,000 Total liabilities Shareholders' equity Common stock $80,000,000 60,000,000 Accumulated retained earnings Total equity $140,000,000 Total liabilities and equity $200,000,000 a) Prepare pro forma income statement and balance sheet for next year. Assume that sales, costs, current assets (cash, accounts receivable, and inventory), fixed assets, and current liabilities (accounts payable and notes payable) grow at the sales growth rate of 15 percent. Also assume that depreciation, interest, long-term debt, common stock, dividend payout ratio, and retention ratio remain the same for next year. Compute external fund needed (EFN). b) Calculate the sustainable growth rate of the firm using the current (not pro forma) financial statements. 1. Firm Q expects a 15 percent sales growth rate for next year. The tax rate is 25 percent. The current end-of-the-year financial statements for the firm are shown below: Firma 20XX Income Statement Sales $300,000,000 Costs Depreciation Earnings before interest and taxes (EBIT) Interest (240,000,000) (10,000,000) $50,000,000 (5,000,000) $45,000,000 (11,250,000) $33,750,000 Taxable income Taxes at 25% Net income Dividends Additions to retained earnings $18,562,500 $15,187,500 Firm Q Balance Sheet as of December 31, 20XX Assets Current assets Cash $15,000,000 Accounts receivable 25,000,000 Inventory 10,000,000 Total current assets $50,000,000 Fixed assets Net plant and equipment $150,000,000 Total assets $200,000,000
