Question

Based on the following information, what is EFN is sales are expected to grow at 20%...

Based on the following information, what is EFN is sales are expected to grow at 20% next year? Assume the firm's dividend paid will be the same next year (total $). The firm is currently operating at 90% capacity. Round your answer to the nearest $0.01

Income Statement
Sales 4250
COGS 2700
SG&A 400
Interest expense 75
Taxable income 1075
Taxes 322.5
Net income 752.5
Dividends 600
Assets Liabilities+OE
Current assets 900 Accounts payable 500
Fixed assets 5000 Long-term debt 4600
Owner's equity 800
Total Assets 5900 TL+OE 5900
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Homework Answers

Answer #1

Profit margin = Net income/Sales = 752.5/4250 = 17.71%
Payout ratio = Dividends/Net income = 600/752.5 = 79.73%
Δ Sales = Sales*20% = 4250*20% = 850
Forcasted sales = Sales+Δ Sales = 4250+850 = 5100

EFN = {[(Total assets*Operating capacity)/Sales]*Δ Sales}-{[(Current liabilities*Operating capacity)/Sales]*Δ Sales}-{Profit margin*Forcasted sales*(1-payout ratio)}
= {[(5900*90%)/4250]*850}-{[(500*90%)/4250]*850}-{17.71%*5100*(1-0.7973)
= [5310/4250*850]-[450/4250*850]-[903.21*0.2027]
= 1,062-90-183.08
= 788.92

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