Question
This is the HW question I cannot get the correct answer for. I've completed the first step but I cannot seem to get the correct
This is the HW question I cannot get the correct answer for. I've completed the first step but I cannot seem to get the correct numbers for EFN for 20, 25 and 30%!?!? See below for given financial statements and my table with the pro forma of 20, 25 and 30% numbers
The most recent financial statements for Scott, Inc., appear below. 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 | $ | 755,000 | ||||
Costs | 611,000 | |||||
Other expenses | 25,000 | |||||
Earnings before interest and taxes | $ | 119,000 | ||||
Interest expense | 10,800 | |||||
Taxable income | $ | 108,200 | ||||
Taxes (22%) | 23,804 | |||||
Net income | $ | 84,396 | ||||
Dividends | $ | 31,840 | ||||
Addition to retained earnings | 52,556 | |||||
SCOTT, INC. Balance Sheet as of December 31, 2019 | |||||||
Assets | Liabilities and Owners Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 24,440 | Accounts payable | $ | 58,200 | ||
Accounts receivable | 33,780 | Notes payable | 15,200 | ||||
Inventory | 70,700 | Total | $ | 73,400 | |||
Total | $ | 128,920 | Long-term debt | $ | 103,000 | ||
Owners equity | |||||||
Fixed assets | Common stock and paid-in surplus | $ | 98,000 | ||||
Net plant and equipment | $ | 212,000 | Retained earnings | 66,520 | |||
Total | $ | 164,520 | |||||
Total assets | $ | 340,920 | Total liabilities and owners equity | $ | 340,920 | ||
0.2 | 0.3 | 0.4 | |||||||
Sales | $ | 755,000 | 906000 | 943750 | 981500 | ||||
Net income | $ | 84,396 | 101275.2 | 107601 | 112242 | ||||
Dividends | $ | 31,840 | 38208 | 40597.86 | 36175.5966 | ||||
Addition to retained earnings | 52,556 | 63067.2 | 67003.14 | 69893.0934 |
Calculate the EFN for 20, 25 and 30 percent growth rates. |
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