Using the data in the student spreadsheet file Ethan Allen Financials forecast the June 30, 2017 income statement and balance sheet for Ethan Allen. Use the percent of sales method and the following assumptions: (1) sales in FY 2017 will be $797.3359; (2) the tax rate will be 35%; (3) each item that changes with sales will be the five-year average percentage of sales; (4) net fixed assets will increase to $300; and (5) the common dividend will be $0.75 per share.

You will need the following assumptions (please do NOT use your judgement):

• Assume that all expenses (not calculations) on the Income Statement vary with sales, except interest expense
• For interest expense, assume a rate of 6%
• Assume no issue/repurchase of common stock, so that shares outstanding, common stock at par, additional paid in capital and Treasury stock remain the same as the prior year
• Assume depreciation expense will be the same as the prior year, plus an additional $5,000,000 resulting from the purchase of a new asset
• Assume all current assets/liabilities will vary with sales
• Assume Other Long Term Assets and Other Liabilities remain the same as the prior year

a. What is the discretionary financing needed in 2017? Is this a surplus or deficit?

b. Assume that the DFN will be absorbed by long-term debt and that the interest rate is 4% of LTD. Set up an iterative worksheet to eliminate it.

Ethan Allen Interiors Inc. Income Statement (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '17* Jun '16 Jun '15 Jun '14 Sales 797.336 794.202 754.600 746.659 Cost of Goods Sold (COGS) incl. D&A 362.374 351.966 343.437 340.163 Gross Income 434.962 442.236 411.163 406.496 SG&A Expense 364.184 353.057 345.229 336.860 EBIT (Operating Income) 70.778 89.179 65.934 69.636 Interest Expense 1.618 5.957 7.540 Other Income - Net 0.395 1.206 0.306 Unusual Expense - Net 0.000 4.500 0.000 Pretax Income 87.956 56.683 62.402 Income Taxes 31.319 19.541 19.471 Net Income 56.637 37.142 42.931 Jun '13 729.083 330.734 398.349 337.912 60.437 8.778 -1.485 0.000 50.174 17.696 32.478 Jun '12 729.373 339.085 390.288 340.676 49.612 9.020 0.562 -0.085 41.239 -8.455 49.694 1.47 1.47 EPS (recurring) EPS (diluted) Diluted Shares Outstanding Total Shares Outstanding Dividends per Share Payout Ratio 2.00 2.00 28.32 27.75 0.62 31.00 1.38 1.27 29.18 28.41 0.50 39.37 29.28 28.93 0.40 27.21 1.11 1.11 29.24 28.91 0.36 32.43 1.71 1.71 29.11 28.84 0.30 17.54 EBITDA EBIT Depreciation & Amortization Expense 108.53 89.18 19.35 85.08 65.93 19.14 87.57 69.64 17.93 78.45 60.44 18.01 68.19 49.61 18.58 Source : FactSet Fundamentals * Forecast Jun '13 Jun '12 Ethan Allen Interiors Inc. Balance Sheet (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '17 * Jun '16 Jun '15 Jun '14 Assets Cash Only 52.66 52.659 76.182 109.176 Total Short Term Investments 0.000 2.198 18.153 Short-Term Receivables 9.467 12.547 12.426 Inventories 162.323 151.916 146.275 Other Current Assets 23.755 27.831 19.599 Total Current Assets 248.204 270.674 305.629 Property, Plant & Equipment - Gross 598.264 594.912 601.709 Accumulated Depreciation 324.649 317.877 313.553 Net Property, Plant & Equipment 273.615 277.035 288.156 Other Long-Term Assets 55.590 59.599 60.649 Total Assets 577.409 607.308 654.434 72.601 15.529 12.277 137.256 22.907 260.570 594.385 302.713 291.672 65.043 617.285 79.721 9.005 14.919 155.739 23.408 282.792 587.368 291.673 295.695 66.301 644.788 3.001 Liabilities & Shareholders' Equity ST Debt & Curr. Portion LT Debt Accounts Payable Other Current Liabilities Total Current Liabilities Long-Term Debt Other Liabilities Total Liabilities Common Stock Par/Carry Value Additional Paid-In Capital/Capital Surplus Retained Earnings Treasury Stock and Other Deductions from Equity Total Shareholders' Equity Total Liabilities & Shareholders' Equity 104.909 123.347 38.837 23.023 185.207 0.489 374.972 646.315 629.574 392.202 577.409 3.341 18.946 118.682 140.969 74.227 21.577 236.773 0.489 370.914 607.079 607.947 370.535 607.308 0.501 24.320 111.226 136.047 130.411 20.509 286.967 0.486 365.733 584.395 583.147 367.467 654.434 0.480 22.995 109.464 132.939 130.809 19.180 282.928 0.486 363.938 553.083 583.150 334.357 617.285 0.250 27.315 123.512 151.077 154.250 17.593 322.920 0.485 361.165 542.918 582.700 321.868 644.788 Source : FactSet Fundamentals * Forecast Ethan Allen Interiors Inc. Income Statement (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '17* Jun '16 Jun '15 Jun '14 Sales 797.336 794.202 754.600 746.659 Cost of Goods Sold (COGS) incl. D&A 362.374 351.966 343.437 340.163 Gross Income 434.962 442.236 411.163 406.496 SG&A Expense 364.184 353.057 345.229 336.860 EBIT (Operating Income) 70.778 89.179 65.934 69.636 Interest Expense 1.618 5.957 7.540 Other Income - Net 0.395 1.206 0.306 Unusual Expense - Net 0.000 4.500 0.000 Pretax Income 87.956 56.683 62.402 Income Taxes 31.319 19.541 19.471 Net Income 56.637 37.142 42.931 Jun '13 729.083 330.734 398.349 337.912 60.437 8.778 -1.485 0.000 50.174 17.696 32.478 Jun '12 729.373 339.085 390.288 340.676 49.612 9.020 0.562 -0.085 41.239 -8.455 49.694 1.47 1.47 EPS (recurring) EPS (diluted) Diluted Shares Outstanding Total Shares Outstanding Dividends per Share Payout Ratio 2.00 2.00 28.32 27.75 0.62 31.00 1.38 1.27 29.18 28.41 0.50 39.37 29.28 28.93 0.40 27.21 1.11 1.11 29.24 28.91 0.36 32.43 1.71 1.71 29.11 28.84 0.30 17.54 EBITDA EBIT Depreciation & Amortization Expense 108.53 89.18 19.35 85.08 65.93 19.14 87.57 69.64 17.93 78.45 60.44 18.01 68.19 49.61 18.58 Source : FactSet Fundamentals * Forecast Jun '13 Jun '12 Ethan Allen Interiors Inc. Balance Sheet (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '17 * Jun '16 Jun '15 Jun '14 Assets Cash Only 52.66 52.659 76.182 109.176 Total Short Term Investments 0.000 2.198 18.153 Short-Term Receivables 9.467 12.547 12.426 Inventories 162.323 151.916 146.275 Other Current Assets 23.755 27.831 19.599 Total Current Assets 248.204 270.674 305.629 Property, Plant & Equipment - Gross 598.264 594.912 601.709 Accumulated Depreciation 324.649 317.877 313.553 Net Property, Plant & Equipment 273.615 277.035 288.156 Other Long-Term Assets 55.590 59.599 60.649 Total Assets 577.409 607.308 654.434 72.601 15.529 12.277 137.256 22.907 260.570 594.385 302.713 291.672 65.043 617.285 79.721 9.005 14.919 155.739 23.408 282.792 587.368 291.673 295.695 66.301 644.788 3.001 Liabilities & Shareholders' Equity ST Debt & Curr. Portion LT Debt Accounts Payable Other Current Liabilities Total Current Liabilities Long-Term Debt Other Liabilities Total Liabilities Common Stock Par/Carry Value Additional Paid-In Capital/Capital Surplus Retained Earnings Treasury Stock and Other Deductions from Equity Total Shareholders' Equity Total Liabilities & Shareholders' Equity 104.909 123.347 38.837 23.023 185.207 0.489 374.972 646.315 629.574 392.202 577.409 3.341 18.946 118.682 140.969 74.227 21.577 236.773 0.489 370.914 607.079 607.947 370.535 607.308 0.501 24.320 111.226 136.047 130.411 20.509 286.967 0.486 365.733 584.395 583.147 367.467 654.434 0.480 22.995 109.464 132.939 130.809 19.180 282.928 0.486 363.938 553.083 583.150 334.357 617.285 0.250 27.315 123.512 151.077 154.250 17.593 322.920 0.485 361.165 542.918 582.700 321.868 644.788 Source : FactSet Fundamentals * Forecast