Problem 18-8 Building Financial Models (LO2) The following is the financial statement of Executive Fruit Company for the year ended December 2014. INCOME STATEMENT, 2014 (Figures in $ Thousands) Revenue $ 4,000 Cost of goods sold 3,600 EBIT $ 400 Interest 80 Earnings before taxes $ 320 State and federal tax 128 Net income $ 192 Dividends 128 Additions to retained earnings $ 64 BALANCE SHEET (Year-End, 2014) (Figures in $ Thousands) Assets Net working capital $ 400 Fixed assets 1,600 Total assets $ 2,000 Liabilities and shareholders' equity Long-term debt $ 800 Shareholders' equity 1,200 Total liabilities and shareholders' equity $ 2,000 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 $ 4,400 Cost of goods sold 3,960 EBIT $ 440 Interest 80 Earnings before taxes $ 360 State and federal tax 144 Net income $ 216 Dividends 144 Additions to retained earnings $ 72 PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 440 Fixed assets 1,760 Total assets $ 2,200 Liabilities and shareholders' equity Long-term debt $ 800 Shareholders' equity 1,272 Total liabilities and shareholders' equity $ 2,072 Required external financing $ 128 Second stage pro forma balance sheet: PRO FORMA BALANCE SHEET (Year-End, 2015) (Figures in $ Thousands) Assets Net working capital $ 440 Fixed assets 1,760 Total assets $ 2,200 Liabilities and shareholders' equity Long-term debt $ 928 Shareholders' equity 1,272 Total liabilities and shareholders' equity $ 2,200 How would Executive Fruits 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 $