Homework Answers
( all fig. in millions)
a. workings-
current sales - 211.6/(1+0.15) = 184
change in sales = 211.6-184= 27.6
current balamce sheet-
| liabilities | amount |
| common stock | 16 |
| retained profits (b.f.) | 126.8 |
| long term debts | 32 |
| short term debts (184*15%) | 27.6 |
| total | 202.4 |
| assets | |
| fixed assets (184*90%) | 165.6 |
| current assets (184*20%) | 36.8 |
| total | 202.4 |
b. External funds needed = [(assets/sales)*change in sales]-[(debt/sales)*change in sales]-[(projected sales*profit margin)*(1-dividend payout ratio)] = [(0.2+0.9)*27.6]-[0.15*27.6]-[(211.6*0.10)*(1-0.40)] = 30.36-4.14-12.696 = 13.524
c. projected net income = 211.6*10% = 21.16
addition to retained income = 21.16*60% = 12.696
pro forma balance sheet-
| liabilities | |
| common stock | 16 |
| retained earning (126.8+12.696) | 139.496 |
| external fund needed (b.f.) | 13.524 |
| long term debts | 32 |
| short term debts (211.6*15%) | 31.74 |
| total | 232.76 |
| assets | |
| fixed assets (211.6*90%) | 190.44 |
| current assets (211.6*20%) | 42.32 |
| total | 232.76 |
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