Sales for Microsoft Corp. (MSFT) are projected to grow by 20%. Assume current assets, spontaneous liabilities, and operating costs grow
in proportion to sales. Interest expense, taxes, and dividends should be treated appropriately.
If the firm is operating at 100% capacity, develop pro-forma financial statements and calculate EFN by completing the yellow boxes.
Not graded: Can you try it again if the firm is operating at 75% capacity?

L W A B D E F G H 1 j K 1 Sales for Microsoft Corp. (MSFT) are projected to grow by 20%. Assume current assets, spontaneous liabilities, and operating costs grow 2 in proportion to sales. Interest expense, taxes, and dividends should be treated appropriately. 3 If the firm is operating at 100% capacity, develop pro forma financial statements and calculate EFN by completing the yellow boxes. 4 Not graded: Can you try it again if the firm is operating at 75% capacity? 5 6 Microsoft Corp. (MSFT) Microsoft Corp. (MSFT) 7 2019 Income Statement (stylized) Balance Sheet (stylized) as of June 30, 2019 8 9 Sales $125,843 Assets 10 (Costs) ($79,469) Current Assets Current Liabilities 11 EBIT $46,374 Cash $133,819 A/P $60,069 12 (int) ($2,686) A/R $29,524 N/P N $9,351 13 EBT $43,688 Inventory $12,209 Total $69,420 14 Taxes ($4,448) Tax rate: Total $175,552 LTD $114,806 15 NI $39,240 Fixed Assets OE 16 Dividends $13,811 div payout ratio: Other $67,148 Common Stock $78,520 17 Add to RE $25,429 retention ratio: Net PPE $43,856 RE $23,810 18 Total OE $102,330 19 Total Assets $286,556 Total L&OE $286,556 20 21 Microsoft Corp. (MSFT) Microsoft Corp. (MSFT) 22 2020 Pro Forma Income Statement Pro Forma Balance Sheet as of June 30, 2020 23 Growth Rate 24 Sales Assets 25 (Costs) Current Assets Current Liabilities 26 EBIT Cash A/P P 27 (Int) A/R N/P N 28 EBT Inventory Total 29 Taxes Tax rate: : Total LTD 30 NI Fixed Assets OE 31 Dividends div payout ratio: Other Common Stock 32 Add to RE retention ratio: Net PPE RE 33 Total OE 34 Total Assets Total L&OE 35 36 EFN = TA-TL&OE 37 38 (note: positive number means the firm needs external funding) 39 (note: zero or negative number means the 40 firm can handle increased sales with only internal funding) 41 42 ANSWER ALL QUESTIONS (except T/F) IN DOLLARS. Please transfer them to your ICE answer sheet. 43 What is the external financing needed? 44 What is your forecast capital expenditure on fixed assets (i.e., difference in FA? 45 What is your forecast of total assets? 46 What is your forecast for tax expense? 47 What is your forecast of net income? 48 What is your forecast for retained earnings? 49 Retained Earnings is a component of Owners Equity T/F 50 If Retained Earnings increases, Owners Equity increases T/F 51 What is MSFT's Internal Self-Supporting (aka Internal) Growth Rate (aka IGR)? 52 53