Question

Consider the following income statement for the Heir Jordan Corporation:

  

HEIR JORDAN CORPORATION Income Statement
Sales					$	47,200
Costs						35,200
Taxable income					$	12,000
Taxes (23%)						2,760
Net income					$	9,240
Dividends	$	2,502
Addition to retained earnings		6,738

  

The balance sheet for the Heir Jordan Corporation follows.

  

HEIR JORDAN CORPORATION Balance Sheet
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	3,100		Accounts payable	$	2,400
Accounts receivable		4,400		Notes payable		4,200
Inventory		6,400		Total	$	6,600
Total	$	13,900		Long-term debt	$	25,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	12,000
Net plant and equipment	$	35,400		Retained earnings		5,700
				Total	$	17,700
Total assets	$	49,300		Total liabilities and owners’ equity	$	49,300

  

Prepare a pro forma balance sheet, assuming an increase in sales of 12 percent, no new external debt or equity financing, and a constant payout ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

Calculate the EFN. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

  

Answer 1