Using the data in the student spreadsheet file Ethan Allen Financials.xlsx forecast the June 30, 2019 income statement and balance sheet for Ethan Allen. Use the percent of sales method and the following assumptions: (1) sales in FY 2019 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. Use your judgment on all other items.

a. What is the discretionary financing needed in 2019? 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.

1 le Ethan Allen Interiors Inc. 2 Income Statement (Industrial) All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 Jun 15 Jun '14 5 Sales 794.202 754.600 746.659 729.083 729.373 6 Cost of Goods Sold (COGS) incl. D&A 351.966 343.437 340.163 330.734 339.085 7 Gross Income 442.236 411.163 406.496 398.349 390.288 8 SG&A Expense 353.057 345.229 336.860 337.912 340.676 9 EBIT (Operating Income) 89.179 65.934 69.636 60.437 49.612 10 Interest Expense 1.618 5.957 7.540 8.778 9.020 11 Other Income - Net 0.395 1.206 0.306 -1.485 0.562 12 Unusual Expense - Net 0.000 4.500 0.000 0.000 -0.085 13 Pretax Income 87.956 56.683 62.402 50.174 41.239 14 Income Taxes 31.319 19.541 19.471 17.696 -8.455 15 Net Income 56.637 37.142 42.931 32.478 49.694 16 17 18 EPS (recurring) 2.00 1.38 1.47 1.11 1.71 19 EPS (diluted) 2.00 1.27 1.47 1.11 1.71 20 Diluted Shares Outstanding 28.32 29.18 29.28 29.24 29.11 21 Total Shares Outstanding 27.75 28.41 28.93 28.91 28.84 22 Dividends per Share 0.62 0.50 0.40 0.36 0.30 23 Payout Ratio 31.00 39.37 27.21 32.43 17.54 24 25 EBITDA 108.53 85.08 87.57 78.45 68.19 26 EBIT 89.18 65.93 69.64 60.44 49.61 27 Depreciation & Amortization Expense 19.35 19.14 17.93 18.01 18.58 28 29 ETH ma ETILDI B Ethan Allen Interiors Inc. Balance Sheet (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '18 Jun '17 Jun '16 Jun '15 Jun '14 52.659 76.182 109.176 72.601 79.721 0.000 2.198 18.153 15.529 9.005 9.467 12.547 12.426 12337 14.919 162.323 151.916 146.275 137.256 155.739 23.755 27.831 19.599 22.907 23.408 248.204 270.674 305.629 260.570 282.792 598.264 594.912 601.709 594.385 587.368 324.649 317.877 313.553 302.713 291.673 273.615 277.035 288.156 291.672 295.695 55.590 59.599 60.649 65.043 66.301 577.409 607.308 654.434 617.285 644.788 Assets Cash Only Total Short Term Investments Short-Term Receivables Inventories o Other Current Assets 1 Total Current Assets -2 Property, Plant & Equipment - Gross 13 Accumulated Depreciation 14 Net Property, Plant & Equipment 15 Other Long-Term Assets 16 Total Assets 17 18 Liabilities & Shareholders' Equity 19 ST Debt & Curr. Portion LT Debt 20 Accounts Payable 21 Other Current Liabilities 22 Total Current Liabilities 23 Long-Term Debt 24 Other Liabilities 25 Total Liabilities 26 Common Stock Par/Carry Value 27 Additional Paid-In Capital Capital Surplus 28 Retained Earnings 29 Treasury Stock and Other Deductions from Equity 30 Total Shareholders' Equity 31 Total Liabilities & Shareholders' Equity 32 3.001 3.341" 0.501 0.480 0.250 15.437 18.946 24.320 22.995 27.315 104.909 118.682 111.226 109.464 123.512 123.347 140.969 136.047 132.939 151.077 38.837 74.227 130.411 130.809 154.250 23.023 21.577 20.509 19.180 17.593 185.207 236.773 286.967 282.928 322.920 0.489 0.489 0.486 0.486 0.485 374.972 370.914 365.733 363.938 361.165 646.315 607.079 584.395 553.083 542.918 629.574 607.947 583.147 583.150 582.700 392.202 370.535 367.467 334.357 321.868 577.409 607.308 654.434 617.285 644.788 ETH Balance Sheet 1 le Ethan Allen Interiors Inc. 2 Income Statement (Industrial) All figures in millions of U.S. Dollar, except per share items 4 Jun '18 Jun '17 Jun '16 Jun 15 Jun '14 5 Sales 794.202 754.600 746.659 729.083 729.373 6 Cost of Goods Sold (COGS) incl. D&A 351.966 343.437 340.163 330.734 339.085 7 Gross Income 442.236 411.163 406.496 398.349 390.288 8 SG&A Expense 353.057 345.229 336.860 337.912 340.676 9 EBIT (Operating Income) 89.179 65.934 69.636 60.437 49.612 10 Interest Expense 1.618 5.957 7.540 8.778 9.020 11 Other Income - Net 0.395 1.206 0.306 -1.485 0.562 12 Unusual Expense - Net 0.000 4.500 0.000 0.000 -0.085 13 Pretax Income 87.956 56.683 62.402 50.174 41.239 14 Income Taxes 31.319 19.541 19.471 17.696 -8.455 15 Net Income 56.637 37.142 42.931 32.478 49.694 16 17 18 EPS (recurring) 2.00 1.38 1.47 1.11 1.71 19 EPS (diluted) 2.00 1.27 1.47 1.11 1.71 20 Diluted Shares Outstanding 28.32 29.18 29.28 29.24 29.11 21 Total Shares Outstanding 27.75 28.41 28.93 28.91 28.84 22 Dividends per Share 0.62 0.50 0.40 0.36 0.30 23 Payout Ratio 31.00 39.37 27.21 32.43 17.54 24 25 EBITDA 108.53 85.08 87.57 78.45 68.19 26 EBIT 89.18 65.93 69.64 60.44 49.61 27 Depreciation & Amortization Expense 19.35 19.14 17.93 18.01 18.58 28 29 ETH ma ETILDI B Ethan Allen Interiors Inc. Balance Sheet (Industrial) All figures in millions of U.S. Dollar, except per share items Jun '18 Jun '17 Jun '16 Jun '15 Jun '14 52.659 76.182 109.176 72.601 79.721 0.000 2.198 18.153 15.529 9.005 9.467 12.547 12.426 12337 14.919 162.323 151.916 146.275 137.256 155.739 23.755 27.831 19.599 22.907 23.408 248.204 270.674 305.629 260.570 282.792 598.264 594.912 601.709 594.385 587.368 324.649 317.877 313.553 302.713 291.673 273.615 277.035 288.156 291.672 295.695 55.590 59.599 60.649 65.043 66.301 577.409 607.308 654.434 617.285 644.788 Assets Cash Only Total Short Term Investments Short-Term Receivables Inventories o Other Current Assets 1 Total Current Assets -2 Property, Plant & Equipment - Gross 13 Accumulated Depreciation 14 Net Property, Plant & Equipment 15 Other Long-Term Assets 16 Total Assets 17 18 Liabilities & Shareholders' Equity 19 ST Debt & Curr. Portion LT Debt 20 Accounts Payable 21 Other Current Liabilities 22 Total Current Liabilities 23 Long-Term Debt 24 Other Liabilities 25 Total Liabilities 26 Common Stock Par/Carry Value 27 Additional Paid-In Capital Capital Surplus 28 Retained Earnings 29 Treasury Stock and Other Deductions from Equity 30 Total Shareholders' Equity 31 Total Liabilities & Shareholders' Equity 32 3.001 3.341" 0.501 0.480 0.250 15.437 18.946 24.320 22.995 27.315 104.909 118.682 111.226 109.464 123.512 123.347 140.969 136.047 132.939 151.077 38.837 74.227 130.411 130.809 154.250 23.023 21.577 20.509 19.180 17.593 185.207 236.773 286.967 282.928 322.920 0.489 0.489 0.486 0.486 0.485 374.972 370.914 365.733 363.938 361.165 646.315 607.079 584.395 553.083 542.918 629.574 607.947 583.147 583.150 582.700 392.202 370.535 367.467 334.357 321.868 577.409 607.308 654.434 617.285 644.788 ETH Balance Sheet