The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 20 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. |
CROSBY, INC. 2017 Income Statement |
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Sales | $ | 980,760 | ||||
Costs | 792,960 | |||||
Other expenses | 20,060 | |||||
Earnings before interest and taxes | $ | 167,740 | ||||
Interest paid | 14,740 | |||||
Taxable income | $ | 153,000 | ||||
Taxes (21%) | 32,130 | |||||
Net income | $ | 120,870 | ||||
Dividends | $ | 39,250 | ||||
Addition to retained earnings | 81,620 | |||||
CROSBY, INC. Balance Sheet as of December 31, 2017 |
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Assets | Liabilities and Owners’ Equity | ||||||
Current assets | Current liabilities | ||||||
Cash | $ | 27,920 | Accounts payable | $ | 71,720 | ||
Accounts receivable | 42,630 | Notes payable | 17,620 | ||||
Inventory | 95,910 | Total | $ | 89,340 | |||
Total | $ | 166,460 | Long-term debt | $ | 170,000 | ||
Fixed assets | Owners’ equity | ||||||
Net plant and equipment | $ | 455,980 | Common stock and paid-in surplus | $ | 140,000 | ||
Retained earnings | 223,100 | ||||||
Total | $ | 363,100 | |||||
Total assets | $ | 622,440 | Total liabilities and owners’ equity | $ | 622,440 | ||
What is the EFN if the firm was operating at only 80 percent of capacity in 2017? Assume that fixed assets are sold so that the company has a 100 percent asset utilization |
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