I have used the suggested formulas I have found for this problem but the answers keep...
I have used the suggested formulas I have found for this problem but the answers keep coming out wrong. Please help!
The Optical Scam Company has forecast a sales growth rate of 20
percent for next year. Current assets, fixed assets, and short-term
debt are proportional to sales. The current financial statements
are shown here:
| INCOME STATEMENT | |||||
| Sales | $ | 32,200,000 | |||
| Costs | 27,743,800 | ||||
| Taxable income | $ | 4,456,200 | |||
| Taxes | 1,559,670 | ||||
| Net income | $ | 2,896,530 | |||
| Dividends | $ | 1,158,612 | |||
| Addition to retained earnings | 1,737,918 | ||||
| BALANCE SHEET | |||||||
| Assets | Liabilities and Equity | ||||||
| Current assets | $ | 7,380,000 | Short-term debt | $ | 7,084,000 | ||
| Long-term debt | 4,958,800 | ||||||
| Fixed assets | 18,058,000 | ||||||
| Common stock | $ | 3,391,200 | |||||
| Accumulated retained earnings | 10,004,000 | ||||||
| Total equity | $ | 13,395,200 | |||||
| Total assets | $ | 25,438,000 | Total liabilities and equity | $ | 25,438,000 | ||
a. Calculate the external funds needed for next
year using the equation from the chapter. (Do not round
intermediate calculations.)
External financing needed
$
b-1. Prepare the firm’s pro forma balance sheet
for next year. (Do not round intermediate
calculations.)
| BALANCE SHEET | |||||||
| Assets | Liabilities and equity | ||||||
| Current assets | $ | Short-term debt | $ | ||||
| Fixed assets | Long-term debt | ||||||
| Common stock | $ | ||||||
| Accumulated retained earnings | |||||||
| Total equity | $ | ||||||
| Total assets | $ | Total liabilities and equity | $ | ||||
b-2. Calculate the external funds needed.
(Do not round intermediate calculations.)
External financing needed
$
c. Calculate the sustainable growth rate for the
company based on the current financial statements. (Do not
round intermediate calculations. Enter your answer as a percent
rounded to 2 decimal places, e.g., 32.16.)
Sustainable growth rate
%
Homework Answers
![Requirement-(a where So Current Sales, ·s-Forecasted Sales-So(1+g), $32,200,000 $38,640,000 [$32,200,000 x(1+20%)] g the forecasted growth rate is Sales, ·A,-Assets (at time 0) which vary directly with Sales, . Lo = Liabilities (at time 0) which vary directly with Sales, PM Profit Margin (Net Income) (Sales), and . b-Retention Ratio (Addition to Retained Earnings) (Net Income) 20% $25,438,000 [Total Assets] $7,084,000 [Short-term debt] 9% [$2,896,530/$32,200,000] 0.60 [$1,737,918/$2,896,530] External Financing Needed (EFN) {[($25,4 38,000/$32,200,000) x ($38,640,000-$32,200,000) ] x ($7,084,000/$32,200,000) x ($38,640,000-$32,200,000)]-5% x $38,640,000 x 0.60] } $1,585,298.40](http://img.homeworklib.com/questions/0ce719c0-703b-11ea-8049-ddd7154123f5.png?x-oss-process=image/resize,w_560)
![Requirement-(b Balance Sheet Assets Liabilities and Equity Current assets Fixed assets $8,856,000.00 Short-term debt $21,669,600.00 Long-term debt Common stock $8,500,800.00 $4,958,800.00 [No change] $3,391,200.00 [No change] $12,089,501.60 $15,480,701.60 $28,940,301.60 Retained earnings Total Equity Total Assets $30,525,600.00 Total Liab. and Equity NOTE Current assets = $7,380,000 x (1+20%-$8,856,000.00; Fixed assets = $18,058,000 x (1+20%-$21,669,600.00; Short-term debt $7,084,000 x (1+20%-$8,500,800.00; RES $10,004,000 + ($38,640,000 x 9% x 0.50-$12,089,501.60 From the balance sheet, it is evident that the totals of balance sheet are not matching. It means that some external finance is required to match them Total Assets Less: Total Liab. and Equity External Financing Needed (EFN) $30,525,600 $28,940,302 $1,585,298.40 [S30,525,600 $28,940,301.60]](http://img.homeworklib.com/questions/0d4f9680-703b-11ea-b261-83e85c6ce233.png?x-oss-process=image/resize,w_560)
![Requirement-(c Sustainable growth rate = [Net Margin x Retention Ratio x Sales/ [Assets-Spontaneous liabilities-(Net Margin x Retention Ratio x Sales), so, Net Margin Retention Ratio Current Sales Assets Spontaneous Liabilities Sustainable growth rate 996 [Ref: Requirement-(a)] 0.60 [Ref: Requirement-(a)] 32,200,000 [Given] $25,438,000 [Total Assets] $7,084,000 [Short-term debt] 10.46% {(996 x 0.60 x $32.200,000) / [$25,438,000-$7,084,000-(9% x 0.60 x $32.200,000)] : 0.10462 10.46%)](http://img.homeworklib.com/questions/0dacfff0-703b-11ea-980a-c1e8eb02f287.png?x-oss-process=image/resize,w_560)
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I have used the suggested formulas I have found for this problem
but the answers keep...
The Optical Scam Company has forecast a sales growth rate of 25 percent for next year....
The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. Current assets, fixed assets, and short-term debt are proportional to sales. The current financial statements are shown here: INCOME STATEMENT Sales $ 32,000,000 Costs 26,309,400 Taxable income $ 5,690,600 Taxes 1,991,710 Net income $ 3,698,890 Dividends $ 1,479,556 Addition to retained earnings 2,219,334 BALANCE SHEET Assets Liabilities and Equity Current assets $ 7,360,000 Short-term debt $ 7,040,000 Long-term debt 2,240,000 Fixed assets...
p0 The Optical Scam Company has forecast a sales growth rate of 25 percent for next...
p0
The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. The current financial statements are shown here Income Statement Sales Costs $ 32,000,000 26,309,400 Taxable income Taxes $ 5,690,600 1,991,710 Net income $3,698,890 Dividends Addition to retained earnings $ 1,479,556 2,219,334 Balance Sheet Assets Liabilities and Equity Current assets $ 7,360,000 Short-term debt Long-term debt $7,040,000 2,240,000 Fixed assets 18,560,000 Common stock Accumulated retained earnings $ 6,070,000 10,570,000 $ 16,640,000 $ 25,920,000 Total...
13. External Funds Needed The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The cu...
13. External Funds Needed The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The current financial statements are shown here: Income Statement Sales $25,380,000 Costs 21,635,000 $ 3,745,000 Taxable income 1,498,000 Taxes $ 2,247,000 Net income $ 786,450 Dividends Addition to retained earnings 1,460,550 Balance Sheet Liabilities and Owners' Equity Assets $ 5,200,000 Current assets $7,200,000 Short-term debt 6,000,000 Long-term debt Fixed assets 17,600,000 $ 3,200,000 Common stock 10,400,000 Accumulated retained earnings Total...
13. External Funds Needed The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The cu...
13. External Funds Needed The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The current financial statements are shown here: Income Statement Sales $25,380,000 Costs 21,635,000 $3,745,000 Taxable income Taxes 1,498,000 Net income $2247,000 Dividends $786,450 Addition to retained earnings 1,460,550 Balance Sheet Liabilities and Owners' Equity Assets $ 5,200,000 Current assets $7,200,000 Short-term debt 6,000,000 Long-term debt Fixed assets 17.600,000 $3,200,000 Common stock 10,400,000 Accumulated retained earnings Total equity $13,600,000 Total assets...
The Optical Scam Company has forecast an 17 percent sales growth rate for next year. The...
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The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. The current financial statements are shown here Income Statement Sales Costs $ 32,000,000 26,309,400 Taxable income Taxes $ 5,690,600 1,991,710 Net income $3,698,890 Dividends Addition to retained earnings $ 1,479,556 2,219,334 Balance Sheet Assets Liabilities and Equity Current assets $ 7,360,000 Short-term debt Long-term debt $7,040,000 2,240,000 Fixed assets 18,560,000 Common stock Accumulated retained earnings $ 6,070,000 10,570,000 $ 16,640,000 $ 25,920,000 Total...
13. External Funds Needed The Optical Scam Company has forecast a sales growth rate of 15 percent for next year. The current financial statements are shown here: Income Statement Sales $25,380,000 Costs 21,635,000 $ 3,745,000 Taxable income 1,498,000 Taxes $ 2,247,000 Net income $ 786,450 Dividends Addition to retained earnings 1,460,550 Balance Sheet Liabilities and Owners' Equity Assets $ 5,200,000 Current assets $7,200,000 Short-term debt 6,000,000 Long-term debt Fixed assets 17,600,000 $ 3,200,000 Common stock 10,400,000 Accumulated retained earnings Total...
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If the firm is operating at full capacity and no new debt or
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Calculate the EFN. (A negative answer should be
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