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(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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