Question

Calculate LEE Corp.’s external funds needed (EFN) for the fiscal year of 2019 using the pro forma statement approach. Assume that the percentages of sales for cost of goods sold, current assets and current liabilities remain unchanged at their respective values in 2018. In addition, the dividend payout ratio is assumed to remain unchanged. It is also assumed that the plant capacity of LEE Corporation was underutilized in 2018 such that existing fixed assets can support the 10% projected growth rate in the sales level for 2019. < … > Note: This problem is part of this homework assignment!

Lee Corp

Income Statement (in millions) 2018

NET SALES	$1800
COST OF GOODS SOLD	$1250
DEPRECIATION EXPENSES	$180
EARNINGS BEFORE INTEREST AND TAXES	$420
INTEREST EXPENSES	$20
TAXABLE INCOME	$400
TAXES (21%)	$84
NET INCOME	$316
DIVIDENDS PAID	$190

Balance Sheet (in millions) 2017 2018

CURRENT ASSETS	$536	$520
NET FIXED ASSETS	$2,164	$2,100
TOTAL ASSETS	$2,700	$2,620
CURRENT LIABILITIES	$980	$900
LONG-TERM DEBT	$278	$218
COMMON STOCK & PAID-IN CAPITAL	$700	$634
RETAINED EARNINGS	$742	$868
TOTAL LIABILITIES & EQUITY	$2,700	$2,620

PLEASE PROVIDE ALL EQUATIONS FOR CREDIT

Answer 1

INCOME STATEMENT
PARTICULAR	2018	2019
Sales	1800	1980
Cost of googs sold	1200	1320
Gross Profit	600	660
Depreciation	180	180
EBIT	420	480
Interest	20	20
EBT	400	460
Tax @ 21%	84	96.6
PAT	316	363.4
Dividends Paid	190	218.5
Retained Earning	126	144.9

BALANCE SHEET
LIABILITIES & EQUITY	2017	2018	2019	ASSETS	2017	2018	2019
Current Liabilities	980	900	900	Current Assets	536	520	520
Long Term Debt	278	218	73.1	Net Fixed Assets	2164	2100	2100
Commons Stock & Paid in Capital	700	634	634
Retained Earnings	742	868	1012.9
TOTAL	2700	2620	2620	TOTAL	2700	2620	2620

Net fixed assets are assumed to be same.

Long Term debt calculated as a difference of Total Assets and other liabilities.