Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes):
Income Statement
Sale
$
s
Balance Sheet
32,800
Cost
Asset
s
$
25,950 Debt
Net
incom
e
$
6,510
6,450
Equit
26,290
s
$
19,500
y
Tot
al
$
25,950
Tot
al
$
25,950
The company has predicted a sales increase of 12 percent. It has predicted that every item on the balance
sheet will increase by 12 percent as well.
Create the pro forma statements and reconcile them.
Pro forma income statement
Sales
Pro forma balance sheet
Assets
$
Debt
$
Costs
$
Equity
Net income
Total
$
Total
$
$
What is the plug variable?
(Click to select)
The plug variable is
in the amount of $
.
The most recent financial statements for Dockett, Inc., are shown here (assuming no income taxes):
Income Statement
Sale
s
$
Cost
8,600
s
$
16,100 Debt
$
2,970
$
Equit
5,630
s
Net
incom
e
Balance Sheet
Asset
9,700
y
Tot
al
$
16,100
Tot
al
6,400
$
16,100
Assets and costs are proportional to sales. Debt and equity are not. No dividends are paid. Next year’s
sales are projected to be $10,578.
What is the external financing needed? (Round your answer to 2 decimal places. (e.g., 32.16))
External financing needed
$
Consider the following income statement for the Heir Jordan Corporation:
HEIR JORDAN CORPORATION
Income Statement
$
Sales
Costs
Taxable
income
Taxes
(30%)
Net income
$
45,300
35,100
10,200
3,060
$
7,140
Dividends $1,900
Addition
to retained
5,240
earnings
The projected sales growth rate is 15 percent.
Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is
constant.
HEIR JORDAN CORPORATION
Pro Forma Income Statement
Sales
$
Costs
Taxable income
$
Taxes
Net income
$
What is the projected addition to retained earnings?
Retained earnings
$
You’ve collected the following information about Odyssey, Inc.:
Sales
Net income
Dividends
Total debt
Total equity
$ 160,000
$ 12,400
$ 8,200
$ 64,000
$ 54,000
What is the sustainable growth rate for the company? (Do not round intermediate calculations. Round
your answer to 2 decimal places. (e.g., 32.16))
Sustainable growth rate
%
If it does grow at this rate, how much new borrowing will take place in the coming year, assuming a constant
debt–equity ratio? (Do not round intermediate calculations. Round your answer to 2 decimal places.
(e.g., 32.16))
Additional borrowing
$
What growth rate could be supported with no outside financing at all? (Do not round intermediate
calculations. Round your answer to 2 decimal places. (e.g., 32.16))
Internal growth rate
%