(solution) Executive Fruit's financial manager believes that sales in 2015

(solution) Executive Fruit's financial manager believes that sales in 2015

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 $…