Question

Using the following income statement and balance sheet, create a pro-forma income statement and balance sheet. Assume a growth rate of 30%, and that the tax rate and dividend payout remain constant. Costs, assets, and accounts payable vary with sales, but the others do not, and the company is operating at 100% capacity. Use this information to answer the first 5 questions: HOFFMAN COMPANY Income Statement Sales 52,000.00 Costs 41,080.00 Taxable Income 10,920.00 Taxes (32%) 3,494.00 Net Income 7,426.00 Dividends 2,599.00 Addition to RE 4,827.00 Current Assets Cash A/R Inventory Total HOFFMAN COMPANY Balance sheet Current Liabilities 3,250.00 A/P 4,775.00 N/P 8,300.00 Total 16,325.00 Long Term Debt Owners' Equity Common 48,625.00 R/E Total 2,850.00 7,200.00 10,050.00 31,500.00 Fixed Assets Net P&E 17,850.00 5,550.00 23,400.00 TOTAL ASSETS 64,950.00 Total Liab & Equity 64,950.00

Answer 1

a. Pro-Forma Income Statement :

HOOFMAN COMPANY
INCOME STATEMENT
Particulars	Amount
Sales	67,600
Costs	53,404
Taxable Income	14,196
Taxes (32%)	4,543
Net Income	9,653
Dividends	3,327
Addition to RE	6,327
Calculation of dividend payout ratio
Dividend payout ratio = 2559/7426 = 0.3446

b. Proforma value for net fixed assets = (48,625/52,000)*67,600 = 63,212.5