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EXECUTIVE FRUIT’S FINANCIAL MANAGER BELIEVES THAT SALES IN 2015

EXECUTIVE FRUIT’S FINANCIAL MANAGER BELIEVES THAT SALES IN 2015

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http://theperfecthomework.com/executive-fruits-financial-manager-believes-that-sales-in-2015-could-rise-by-as-much-as-20-or-by-as-little-as-5-assets-and-costs-change-in-proportion-to-sales-debt-remains-constant-and-no-new-equity-financing-occurs/

Executive Fruit’s financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs.

 
a.

Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands). (Enter your answers in thousands.)

 
 

Base Case

     20% Growth

     5% Growth

INCOME STATEMENT

  Revenue

$

3,000

$  

$  

  Cost of goods sold

2,700

  EBIT

$

300

$  

$  

  Interest

60

  Earnings before taxes

$

240

$  

$  

  State and federal tax

96

  Net income

$

144

$  

$  

  Dividends

96

  Retained earnings

$

48

$  

$  

BALANCE SHEET

  Assets

     Net working capital

$

300

$  

$  

     Fixed assets

1,200

     Total assets

$

1,500

$  

$  

  Liabilities and shareholders' equity

     Long-term debt

$

600

$  

$  

     Shareholders' equity

900

     Total liabilities and shareholders' equity

$

1,500

$  

$  

  Required external financing

$  

$  

 
b.

Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in thousands.)


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