Question 1 -- Pro Forma Financial Statements and EFN 22 marks Moe Enterprises management team is working on next year's annual budget. Sales are projected to increase 9% next year. All costs (except Interest and taxes), current assets and accounts payable are expected to vary with sales. Interest expense and the tax rate will remain constant Management plans to maintain a constant dividend payout ratio next year. The company is currently operating at a fixed asset capacity of 79%. Assume no new debt or equity will be issued. a) Complete the Pro Forma Income Statement and Balance Sheet below for Moe Enterprises. CELL REFERENCE APPROPRIATELY. Pro Forma Base Pro Forma Base Pro Forma Base 550,000 222,000 100,000 Income Statement Sales Cost of Goods Sold Operating Expenses EBIT Interest Expense EBT Taxes Net Income Balance Sheet Current assets: Cash Accounts Receivable Inventory Total current assets 48,000 95,000 88,000 231,000 Current liabilities: Accounts payable Notes payable Total current liabilities 37,000 75,000 112,000 10,000 LT Debt 183,000 Fixed Assets 400,000 235,000 101,000 336,000 631,000 Dividends Addition to RE Common shares Retained Earnings Total Equity Total Llab & Equity 30,000 Total Assets 631,000 $ EFN Sales Increase Pro Forma Dlv payout ratio Tax rate 30% b) Does this company need more external financing (INCREASE) or can it reduce it's external financing (DECREASE)? Name 2 possible ways of dealing with this external financing requirement? c) Suppose the company was operating at full capacity (100%) this year, rather than 79%. For next year, what will Total Fixed Assets be in order to support the growth in sales? What is the net Increase in new fixed assets (new asset purchases)? Question 1 -- Pro Forma Financial Statements and EFN 22 marks Moe Enterprises management team is working on next year's annual budget. Sales are projected to increase 9% next year. All costs (except Interest and taxes), current assets and accounts payable are expected to vary with sales. Interest expense and the tax rate will remain constant Management plans to maintain a constant dividend payout ratio next year. The company is currently operating at a fixed asset capacity of 79%. Assume no new debt or equity will be issued. a) Complete the Pro Forma Income Statement and Balance Sheet below for Moe Enterprises. CELL REFERENCE APPROPRIATELY. Pro Forma Base Pro Forma Base Pro Forma Base 550,000 222,000 100,000 Income Statement Sales Cost of Goods Sold Operating Expenses EBIT Interest Expense EBT Taxes Net Income Balance Sheet Current assets: Cash Accounts Receivable Inventory Total current assets 48,000 95,000 88,000 231,000 Current liabilities: Accounts payable Notes payable Total current liabilities 37,000 75,000 112,000 10,000 LT Debt 183,000 Fixed Assets 400,000 235,000 101,000 336,000 631,000 Dividends Addition to RE Common shares Retained Earnings Total Equity Total Llab & Equity 30,000 Total Assets 631,000 $ EFN Sales Increase Pro Forma Dlv payout ratio Tax rate 30% b) Does this company need more external financing (INCREASE) or can it reduce it's external financing (DECREASE)? Name 2 possible ways of dealing with this external financing requirement? c) Suppose the company was operating at full capacity (100%) this year, rather than 79%. For next year, what will Total Fixed Assets be in order to support the growth in sales? What is the net Increase in new fixed assets (new asset purchases)
