No 4 Using the following income statement, balance sheet and additional information complete the tasks + mention below Income Statement Sale 4200 Operating costs 3.780 EBIT 420 Interest 120 EBT 300 Taxes (40%) 120 Net Income 180 Dividends 0 Addition to retrained earnings 180 700 Balance Sheet Cash and marketable securities 42 Accounts receivable 336 Inventories 441 Current Assets 819 Net fixed assets 2562 Total Assets 3.381 Accounts payable and accruals 168 Notes pavable 250 Current liabilities 418 Long term debt Common stock 400 Retained earnings 1863 Total liabilities and equity 3.381 In developing its forecast for the upcoming vear, the company has assembled the following information: Sales are expected to increase 8% this upcoming year Operating costs are expected to remain at 90% of sales. Cash and marketable securities are expected to remain at 1% of sales Accounts receivable are expected to remain at 8% of sales Due to excess capacity the company expects that its year end inventories will remain at current levels. Fixed assets are expected to remain at 61% of sales Spontaneous liabilities (accounts payable and accruals) are expected to increase at the same rate as sales. The company will continue to pay a zero dividend, and its tax rate will remain at 40%. The company anticipates that any additional funds needed will be raised in the following manner: 25% notes payable, 25% long-term debt, and 30% common stock Task: 1. Based on the assumptions listed above, construct Proforma income statement and balance sheet. Assume that there are no financial feedback effects (That is assume interest will remain unchanged even though the company may increase its debt). (Total Marks 2.5) 2. Based upon this forecast, describe changes from the prior year that should expect in its return on equity, inventory tumover ratio and profit margin (Total Marks 2.5)