Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pro Forma Income Statement December 31, 2007 (Thousands of Dollars) 2007 Sales $8,000 Operating costs 7,450 EBIT $ 550 Interest 150 EBT $ 400 Taxes

Pro Forma Income Statement

December 31, 2007

(Thousands of Dollars)

2007

Sales $8,000

Operating costs 7,450

EBIT $ 550

Interest 150

EBT $ 400

Taxes (40%) 160

Net income $ 240

Less: Dividends:

$1.04 x 150 = $ 156

Addition to R.E.= $ 84

Pro Forma Balance Sheet

December 31, 2007

(Thousands of Dollars)

2007

Cash $ 80

Receivables 240

Inventories 720

Total current assets $1,040

Fixed assets 3,200

Total assets $4,240

Accounts Payable 160

Accrued liab. 40

Notes payable 252

Total current liabilities $ 452

Long-term debt 1,244

Total debt $1,696

Common stock 1,605

Retained Earnings 939

Total liabilities and equity $4,240

1. It expects sales to increase by 20% during 2008 and expects dividends per share to increase to $1.10, based upon 150 shares outstanding. Fixed Assets are closely tied to sales levels. Use the Percent of Sales method to project the 2008 financial statements for the firm. How much AFN doe the firm require?

2. The firm must maintain a current ratio of 2.3 and a debt ratio of 40%. How much financing will be obtained using notes payable, long-term debt and common stock?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Dividend Growth Investing Machine

Authors: Andrew P.C.

1st Edition

1521728461, 978-1521728468

More Books

Students also viewed these Finance questions