(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 $...

 

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