Question

The most recent financial statements for Hopington Tours Inc. follow. Sales for 2018 are projected to grow by 25%. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, and accounts payable increase spontaneously with sales. The firm is operating at full capacity and no new debt or equity is issued. HOPINGTON TOURS INC. 2017 Statement of Comprehensive Income Sales Costs Other expenses Earnings before interest and taxes Interest paid Taxable income Taxes (30%) Net income Dividends $20, 320 Addition to retained earnings 68,580 $750,000 585,000 21,000 $144,000 17,000 $127,000 38,100 $ 88,900 HOPINGTON TOURS INC. Statement of Financial Position as of December 31, 2017 Assets Liabilities and owners' Equity Current assets Current liabilities Cash $ 26,000 Accounts payable Accounts receivable 41,400 Notes payable Inventory 87,600 Total Total $ 155,000 Long-term debt Owners' equity Fixed assets Common stock and paid-in surplus Net plant and equipment $300, 400 Retained earnings Total Total assets $455,400 Total liabilities and owners' equity $ 68, 700 17,700 $ 86, 400 $133,000 $119,000 117,000 $ 236,000 $455,400

Answer 1

Hopington Tours Inc. Pro Forma Statement of Comprehensive Income Particulars Workings 750,000 * 125% 585,000 * 125% 21,000 * 125% Same Sales Costs Other Expense EBIT Interest Taxable income Taxes (30%) Net Income Dividends Addition to RE 25% Sales Growth ($) 937,500.00 731,250.00 26,250.00 180,000.00 17,000.00 163,000.00 48,900.00 114,100.00 26,080.00 88,020.00 163,000 * 30% 114,100*(20,320/88,900)

Hopington Tours Inc. Pro Forma Statement of Financial Position Assets Amount ($) Liabilities and Owner's Equity Amount ($) Current Assets Current Liabilities Cash 32,500.00 Accounts Payable 85,875.00 Accounts Receivables 51,750.00 Notes Payable 17,700.00 Inventory 109,500.00 Total 103,575.00 Total 193,750.00 Long-term Debt 133,000.00 Owner's Equity Fixed Assets Common Stock and Paid-in-Surplus 119,000.00 Net Plant and Equipment 375,500.00 Retained Earnings 205,020.00 Total 324,020.00 Total Assets 569,250.00 Total Liabilities and Owner's Equity 560,595.00

All the assets and accounts payable increase by 25%

External Financing Needs (ENF) = Total Assets - Total Liabilities and Owner's Equity

= $(569,250 - 560,595) = $ 8,655.00