Question

suppose The company was operating at only 90% capacity in 2017

what would be the EFN to achieve 20% growth rate ?

What would be the efn to achieve 30% growth rate

Input
Tesla, Inc.
2017 Income Statement			Other Inputs
Sales	40,259,230		Tax rate	40%
COGS	29,336,446		Growth rate	15%
Other expenses	5,105,100		Capacity Utilization	100%
Depreciation	1,804,220
EBIT	4,013,464
Interest	630,520
Taxable income	3,382,944
Taxes (40%)	1,353,178
Net income	2,029,766
Dividends	610,000
Add to RE	1,419,766
Tesla, Inc.
Balance Sheet as of December 2017
Assets			Liabilities & Equity
Current Assets			Current Liabilities
Cash	456,435		Accounts Payable	929,005
Accounts rec.	733,125		Notes Payable	2,121,350
Inventory	1,073,180		Total CL	3,050,355
Total CA	2,262,740
			Long-term debt	5,500,000
			Shareholder Equity
Fixed assets			Common stock	400,000
Net PP&E	17,723,430		Retained earnings	11,035,815
			Total Equity	11,435,815
Total Assets	19,986,170		Total L&E	19,986,170
Calculation & Output
Question 1
Return on assets	10.16%	0.10
Return on equity	17.75%	0.18
Payout Ratio	30%
Retention ratio	70%
Internal growth rate	7.65%
Sustainable growth rate	12.42%
Question 2 & 3
Tesla, Inc.
Proforma Income Statement			Fixed Asset Calculation
Sales	46,298,115		Full capacity sales	40,259,230
COGS	33,736,913		Fixed assets/sales at full capacity	0.44
Other expenses	5,870,865		Total fixed assets	20,381,945
Depreciation	2,074,853
EBIT	4,615,484
Interest	725,098
Taxable income	3,890,386
Taxes (40%)	1,556,154
Net income	2,334,231
Dividends	701,500
Add to RE	1,632,731
Tesla, Inc.
Proforma Balance Sheet
Assets			Liabilities & Equity
Current Assets			Current Liabilities
Cash	$                                               524,900		Accounts Payable	1,068,356
Accounts rec.	$                                               843,094		Notes Payable	2,121,350
Inventory	$                                           1,234,157		Total CL	3,189,706
Total CA	2,602,151
			Long-term debt	5,500,000
Fixed assets
Net PP&E	20,381,945		Shareholder Equity
			Common stock	400,000
			Retained earnings	12,668,546
			Total Equity	13,068,546
Total Assets	22,984,096		Total L&E	21,758,252
EFN	22,984,096
Data Table
		Capacity Utilization
Growth Rates		80%	90%	95%	100%
	10%
	12%
	15%
	20%
	30%
	40%

Answer 1

A)Calculation of external financing requirement at 20% growth rate and

90% current capacity utilization

Full capacity sales= Current sales/(capacity utilization)

Full capacity sales=(40,259,230/0.9)=        44,732,478

Projected sales at   20% growth rate=1.20*40,259,230= 48,311,076

External Finance is needed for sales beyond full capacity utilization.

External finance needed for increasing sales from 44,732,478 to 48,311,076

Increase in assets needed=(48311076/44732478)-1=0.08=8%

Total Assets at present=19,986,170

(A)Increase in total assets required=19986170*0.08= 1,598,894

(B) Current asset increase required for increase in sales to full capacity=(current asset at present )*((44732478/40259230)-1)= 2,262,740*0.1111=   251,416

(C).Spontaneous increase in liabilities=(accounts payable)* (percentage increase in sales)=929005*0.2=185,801

(D)Increase in retained earning =(Profit margin)*(Sales)*(Retention ratio)

Profit margin=(2029766/40259230)= 0.050417407

Sales=48,311,076

Retention Ratio=(Net Income-Dividend)/(Net Income)=1-(Dividend/Net Income)=1-(610000/2029766)= 0.699472747

Increase in retained earnings)= 0.050417407*48,311,076*0.699472747=           1,703,719

External Finance Needed=(A)+(B)-(C)-(D)=1598894+251416-185801-1703719=-39210

No External Finance is required . Increase in retained earning will be sufficient

B)Calculation of external financing requirement at 30% growth rate and

90% current capacity utilization

Full capacity sales= Current sales/(capacity utilization)

Full capacity sales=(40,259,230/0.9)=        44,732,478

Projected sales at   30% growth rate=1.30*40,259,230= 52,336,999

External Finance is needed for sales beyond full capacity utilization.

External finance needed for increasing sales from 44,732,478 to 52,336,999

Increase in assets needed=(52336999/44732478)-1=17%=0.17

Total Assets at present=19,986,170

(A)Increase in total assets required=19986170*0.17= 3,397,649

(B) Current asset increase required for increase in sales to full capacity=(current asset at present )*((44732478/40259230)-1)= 2,262,740*0.1111=   251,416

(C).Spontaneous increase in liabilities=(accounts payable)* (percentage increase in sales)=929005*0.3= 278,702

(D)Increase in retained earning =(Profit margin)*(Sales)*(Retention ratio)

Profit margin=(2029766/40259230)= 0.050417407

Sales=52336999

Retention Ratio=(Net Income-Dividend)/(Net Income)=1-(Dividend/Net Income)=1-(610000/2029766)= 0.699472747

Increase in retained earnings)= 0.050417407*52336999*0.699472747= 1,845,696

      External Finance Needed=(A)+(B)-(C)-(D)=3397649+251416-278702-1845696=              1,524,667

External Finance Needed

$          1,524,667