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Executive Fruit?s financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs. |
| a. |
Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands). (Enter your answers in thousands.) |
| Base Case | 20% Growth | 5% Growth | ||||
| INCOME STATEMENT | ||||||
| Revenue | $ | 3,000 | $ | $ | ||
| Cost of goods sold | 2,700 | |||||
| EBIT | $ | 300 | $ | $ | ||
| Interest | 60 | |||||
| Earnings before taxes | $ | 240 | $ | $ | ||
| State and federal tax | 96 | |||||
| Net income | $ | 144 | $ | $ | ||
| Dividends | 96 | |||||
| Retained earnings | $ | 48 | $ | $ | ||
| BALANCE SHEET | ||||||
| Assets | ||||||
| Net working capital | $ | 300 | $ | $ | ||
| Fixed assets | 1,200 | |||||
| Total assets | $ | 1,500 | $ | $ | ||
| Liabilities and shareholders’ equity | ||||||
| Long-term debt | $ | 600 | $ | $ | ||
| Shareholders’ equity | 900 | |||||
| Total liabilities and shareholders’ equity | $ | 1,500 | $ | $ | ||
| Required external financing | $ | $ | ||||
| b. |
Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in thousands.) |
| BALANCE SHEET | ||||||
| Base Case | 20% Growth | 5% Growth | ||||
| Assets | ||||||
| Net working capital | $ | 300 | $ | $ | ||
| Fixed assets | 1,200 | |||||
| Total assets | $ | 1,500 | $ | $ | ||
| Liabilities and shareholders’ equity | ||||||
| Long-term debt | $ | 600 | $ | $ | ||
| Shareholders’ equity | 900 | |||||
| Total liabilities and shareholders’ equity | $ | 1,500 | $ | $ | ||
20%
Growth Base Case 5%
Growth INCOME
STATEME
NT Revenue $ $3,000.00 $3,600.00 $3,150.00 Cost of
goods
sold $2,700.00 $3,240.00 $2,835.00 EBIT
$ Interest $ 300.00
$ 60.00 $ 360.00
$ 72.00 $…