Please see attached document

The following is the financial statement of Executive Fruit Company for the year ended December 2014.

INCOME STATEMENT, 2014 (Figures in $ Thousands) Revenue $ 7,500 Cost of goods sold 6,750 EBIT $ 750 Interest 150 Earnings before taxes $ 600 State and federal tax 240 Net income $ 360 Dividends 240 Additions to retained earnings $ 120

BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands) Assets Net working capital $ 750 Fixed assets 3,000 Total assets $ 3,750 Liabilities and shareholders' equity Long-term debt $ 1,500 Shareholders' equity 2,250 Total liabilities and shareholders' equity $ 3,750

The following are the first stage and second stage pro forma financial statements of Executive Fruit Companyfor the year ended December 2015.

First stage pro forma statements:

PRO FORMA INCOME STATEMENT, 2015 (Figures in $ Thousands) Revenue $ 8,250 Cost of goods sold 7,425 EBIT $ 825 Interest 150 Earnings before taxes $ 675 State and federal tax 270 Net income $ 405 Dividends 270 Additions to retained earnings $ 135

PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 825 Fixed assets 3,300 Total assets $ 4,125 Liabilities and shareholders' equity Long-term debt $ 1,500 Shareholders' equity 2,385 Total liabilities and shareholders' equity $ 3,885 Required external financing $ 240

Second stage pro forma balance sheet:

PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 825 Fixed assets 3,300 Total assets $ 4,125 Liabilities and shareholders' equity Long-term debt $ 1,740 Shareholders' equity 2,385 Total liabilities and shareholders' equity $ 4,125

How would Executive Fruit?s financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.)

Dividends fall by $ . Therefore, the requirement for external financing falls from $ to $ . On the other hand, shareholders' equity will be increased by $ .

The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.):

Long-term debt $ Shareholders' equity Total $

The following is the financial statement of Executive Fruit Company for the year ended December 2014. INCOME STATEMENT, 2014 (Figures in $ Thousands) Revenue $ 7,500 Cost of 6,750 goods sold EBIT Interest Earnings before taxes State and federal tax Net income Dividends Additions to retained earnings $ 750 150 $ 600 240 $ 360 240 $ 120 BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands) Assets Net working $ 750 capital Fixed assets 3,000 Total assets $ 3,750 Liabilities and shareholders' equity Long-term debt Shareholders' equity $ Total liabilities and shareholders' equity $ 1,500 2,250 3,750 The following are the first stage and second stage pro forma financial statements of Executive Fruit Company for the year ended December 2015. First stage pro forma statements: PRO FORMA INCOME STATEMENT, 2015 (Figures in $ Thousands) Revenue $ 8,250 Cost of 7,425 goods sold EBIT Interest Earnings before taxes State and federal tax Net income Dividends Additions to retained earnings $ 825 150 $ 675 270 $ 405 270 $ 135 PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 825 Fixed assets 3,300 Total assets $ 4,125 $ 1,500 2,385 Total liabilities and shareholders' equity $ 3,885 Required external financing $ 240 Liabilities and shareholders' equity Long-term debt Shareholders' equity Second stage pro forma balance sheet: PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 825 Fixed assets 3,300 Total assets Liabilities and shareholders' equity Long-term debt Shareholders' equity Total liabilities and $ 4,125 $ 1,740 2,385 $ 4,125 shareholders' equity How would Executive Fruit's financial model change if the dividend payout ratio were cut to 1/3? Use the revised model to generate a new financial plan for 2015 assuming that debt is the balancing item. What would be the required external financing? (Do not round intermediate calculations.) Dividends fall by $ from $ . Therefore, the requirement for external financing falls to $ increased by $ . On the other hand, shareholders' equity will be . The right-hand side of the balance sheet becomes (Do not round intermediate calculations. Enter your answers in thousands.): Long-term debt $ Shareholders' equity Total $