Question

Consider the following income statement for the Heir Jordan Corporation:

HEIR JORDAN CORPORATION Income Statement
Sales					$	45,900
Costs						35,400
Taxable income					$	10,500
Taxes (22%)						2,310
Net income					$	8,190
Dividends	$	2,510
Addition to retained earnings		5,680

HEIR JORDAN CORPORATION Balance Sheet
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	2,300		Accounts payable	$	4,000
Accounts receivable		5,200		Notes payable		8,100
Inventory		8,000		Total	$	12,100
Total	$	15,500		Long-term debt	$	21,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	11,000
Net plant and equipment	$	37,000		Retained earnings		8,400
				Total	$	19,400
Total assets	$	52,500		Total liabilities and owners’ equity	$	52,500

Prepare a pro forma balance sheet, assuming an increase in sales of 16 percent, no new external debt or equity financing, and a constant payout ratio.

Calculate the EFN.

Answer 1