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The most recent financial statements for Scott, Inc., appear below. Sales for 2020 are projected to grow by 30 percent. Interest expense will remain constant;
The most recent financial statements for Scott, Inc., appear below. Sales for 2020 are projected to grow by 30 percent. Interest expense will remain constant; the tax rate and the dividend payout rate also will remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. |
SCOTT, INC. 2019 Income Statement | ||||||
Sales | $ | 765,000 | ||||
Costs | 621,000 | |||||
Other expenses | 30,000 | |||||
Earnings before interest and taxes | $ | 114,000 | ||||
Interest expense | 14,800 | |||||
Taxable income | $ | 99,200 | ||||
Taxes (22%) | 21,824 | |||||
Net income | $ | 77,376 | ||||
Dividends | $ | 24,840 | ||||
Addition to retained earnings | 52,536 | |||||
SCOTT, INC. Balance Sheet as of December 31, 2019 | |||||||
Assets | Liabilities and Owners Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 25,440 | Accounts payable | $ | 62,200 | ||
Accounts receivable | 34,880 | Notes payable | 18,200 | ||||
Inventory | 71,600 | Total | $ | 80,400 | |||
Total | $ | 131,920 | Long-term debt | $ | 113,000 | ||
Owners equity | |||||||
Fixed assets | Common stock and paid-in surplus | $ | 112,000 | ||||
Net plant and equipment | $ | 222,000 | Retained earnings | 48,520 | |||
Total | $ | 160,520 | |||||
Total assets | $ | 353,920 | Total liabilities and owners equity | $ | 353,920 | ||
What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.) |
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