Question
In: Finance
1. The most recent financial statements for Cornwall, Inc., are shown here: Income Statement Balance Sheet...
1.
|
The most recent financial statements for Cornwall, Inc., are shown here: |
| Income Statement | Balance Sheet | ||||||||||
| Sales | $ | 7,400 | Current assets | $ | 4,100 | Current liabilities | $ | 2,200 | |||
| Costs | 6,000 | Fixed assets | 9,800 | Long-term debt | 3,750 | ||||||
| Taxable income | $ | 1,400 | Equity | 7,950 | |||||||
| Taxes (34%) | 476 | Total | $ | 13,900 | Total | $ | 13,900 | ||||
| Net income | $ | 924 | |||||||||
|
Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 20 percent dividend payout ratio. As with every other firm in its industry, next year’s sales are projected to increase by exactly 15 percent. |
|
What is the external financing needed? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) |
| External financing needed |
$ |
2.
|
Consider the following income statement for the Heir Jordan Corporation: |
|
HEIR JORDAN CORPORATION Income Statement |
||||||
| Sales | $ | 43,200 | ||||
| Costs | 34,000 | |||||
| Taxable income | $ | 9,200 | ||||
| Taxes (35%) | 3,220 | |||||
| Net income | $ | 5,980 | ||||
| Dividends | $ | 2,700 | ||||
| Addition to retained earnings | 3,280 | |||||
|
The projected sales growth rate is 15 percent. |
|
Prepare a pro forma income statement assuming costs vary with sales and the dividend payout ratio is constant. (Input all amounts as positive values. Do not round intermediate calculations.) |
|
HEIR JORDAN CORPORATION Pro Forma Income Statement |
|
| Sales | $ |
| Costs | |
| Taxable income | $ |
| Taxes | |
| Net income | $ |
|
What is the projected addition to retained earnings? (Do not round intermediate calculations.) |
| Addition to retained earnings |
$ |
Solutions
Expert Solution
1) Current Net profit margin = Net income / Sales = $924 / $7400 = 0.12486486486
Next year sales = $7400 + 15% = $8510
Next year net profit margin = $8510 x 0.12486486486 = $1062.60
Addition to retained earnings = Next year net profit margin x (1 - payout ratio) = $1062.60 x (1 - 0.20) = $850.08
| Current Assets | $4100 + 15% = $4715 | Current Liabilities | $2200 + 15% = $2530 |
| Fixed Assets | $9800 + 15% = $11270 | Long term debt | $3,750 |
| Equity | $7950 + $850.08 = $8800.08 | ||
| Total | $15985 | Total | $15080.08 |
External Financing needed = $15985 - $15080.08 = $904.92
2) Current dividend payout ratio = Dividend / net income = $2700 / $5980 = 0.45150501672
| Sales ($43,200 + 15%) | $49,680 |
| Less: Costs ($34,000 + 15%) | $39,100 |
| Taxable income | $10,580 |
| Less: Taxes @35% | $3,703 |
| Net Income | $6,877 |
| Less: Dividends ($6,877 x 0.45150501672) | $3,105 |
| Addition to retained earnings | $3,772 |
jeff jeffy answered 1 year agoRelated Solutions
1. The most recent financial statements for Cornwall, Inc., are shown here: Income Statement Balance Sheet...
1.
The most recent financial statements for Cornwall, Inc., are
shown here:
Income Statement
Balance Sheet
Sales
$
6,000
Current assets
$
2,700
Current liabilities
$
2,200
Costs
4,950
Fixed assets
9,100
Long-term debt
3,750
Taxable income
$
1,050
Equity
5,850
Taxes (34%)
357
Total
$
11,800
Total
$
11,800
Net
income
$
693
Assets, costs, and current liabilities are proportional to
sales. Long-term debt and equity are not. The company maintains a
constant 40 percent dividend payout ratio. As...
The most recent financial statements for Cornwall, Inc., are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for Cornwall, Inc., are
shown here: Income Statement Balance Sheet Sales $ 7,400 Current
assets $ 4,100 Current liabilities $ 2,200 Costs 6,000 Fixed assets
9,800 Long-term debt 3,750 Taxable income $ 1,400 Equity 7,950
Taxes (34%) 476 Total $ 13,900 Total $ 13,900 Net income $ 924
Assets, costs, and current liabilities are proportional to sales.
Long-term debt and equity are not. The company maintains a constant
20 percent dividend payout ratio. As with...
The most recent financial statements for Cornwall, Inc., are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for Cornwall, Inc., are
shown here:
Income Statement
Balance Sheet
Sales
$
5,800
Current assets
$
2,500
Current liabilities
$
2,200
Costs
4,400
Fixed assets
8,100
Long-term debt
3,750
Taxable income
$
1,400
Equity
4,650
Taxes (34%)
476
Total
$
10,600
Total
$
10,600
Net
income
$
924
Assets, costs, and current liabilities are proportional to
sales. Long-term debt and equity are not. The company maintains a
constant 30 percent dividend payout ratio. As with...
The most recent financial statements for Cornwall, Inc., are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for Cornwall, Inc., are
shown here: Income Statement Balance Sheet Sales $ 5,800 Current
assets $ 2,500 Current liabilities $ 2,200 Costs 4,400 Fixed assets
8,100 Long-term debt 3,750 Taxable income $ 1,400 Equity 4,650
Taxes (34%) 476 Total $ 10,600 Total $ 10,600 Net income $ 924
Assets, costs, and current liabilities are proportional to sales.
Long-term debt and equity are not. The company maintains a constant
30 percent dividend payout ratio. As with...
The most recent financial statements for ABC, Inc. are shown here: Income Statement Balance Sheet...
The most recent financial statements for ABC, Inc. are shown
here:
Income Statement
Balance Sheet
Sales
4,800
Current assets
6,084
Current Liabilities
1,244
Costs
3,840
Fixed assets
5,183
Long-term debt
2,487
Taxable income
960
Equity
7,036
Taxes (35%)
336
Retained earnings
500
Net income
624
Total
11,267
Total
11,267
The company is running at full capacity and the company
maintains a constant 50 percent dividend payout ratio. Like every
other firm in its industry, next year's sales are projected...
The most recent financial statements for Bello, Inc., are shown here: Income Statement Balance Sheet...
The most recent financial statements for Bello, Inc., are shown
here:
Income Statement
Balance Sheet
Sales
$
40,200
Assets
$
148,000
Debt
$
43,500
Costs
27,300
Equity
104,500
Taxable income
$
12,900
Total
$
148,000
Total
$
148,000
Taxes (23%)
2,967
Net income
$
9,933
Assets and costs are proportional to sales; debt and equity are
not. A dividend of $3,450 was paid, and the company wishes to
maintain a constant payout ratio. Next year’s sales are projected...
The most recent financial statements for Bello, Inc., are shown here: Income Statement Balance Sheet...
The most recent financial statements for Bello, Inc., are shown
here:
Income Statement
Balance Sheet
Sales
$
39,600
Assets
$
145,000
Debt
$
42,000
Costs
27,000
Equity
103,000
Taxable income
$
12,600
Total
$
145,000
Total
$
145,000
Taxes (25%)
3,150
Net income
$
9,450
Assets and costs are proportional to sales; debt and equity are
not. A dividend of $3,300 was paid, and the company wishes to
maintain a constant payout ratio. Next year’s sales are projected...
The most recent financial statements for Summer Tyme, Inc., are shown here: Income Statement Balance Sheet...
The most recent financial statements for Summer Tyme, Inc., are
shown here:
Income Statement
Balance Sheet
Sales
$3,600
Current assets
$5,200
Current liabilities
$790
Costs
2,700
Fixed assets
4,700
Long-term debt
3,640
Taxable income
$900
Equity
5,470
Taxes (31%)
279
Total
$9,900
Total
$9,900
Net income
$621
Assets, costs, and current liabilities are proportional to
sales. Long-term debt and equity are not. The company maintains a
constant 50 percent dividend payout ratio. As with every other firm
in its industry,...
The most recent financial statements for GPS, Inc., are shown here: Income Statement Balance Sheet Sales...
The most recent financial statements for GPS, Inc., are shown
here:
Income Statement
Balance Sheet
Sales
$23,800
Assets
$121,000
Debt
$43,600
Costs
16,900
Equity
77,400
Taxable income
$6,900
Total
$121,000
Total
$121,000
Taxes (30%)
2,070
Net income
$4,830
Assets and costs are proportional to sales. Debt and equity are
not. A dividend of $1,470 was paid, and the company wishes to
maintain a constant payout ratio. Next year's sales are projected
to be $29,400.
Required:
What is the external financing...
The most recent financial statements for Summer Tyme, Inc., are shown here: Income Statement Balance Sheet...
The most recent financial statements for Summer Tyme, Inc., are
shown here:
Income Statement
Balance Sheet
Sales
$3,800
Current assets
$5,200
Current liabilities
$790
Costs
2,400
Fixed assets
5,700
Long-term debt
3,510
Taxable income
$1,400
Equity
6,600
Taxes (35%)
490
Total
$10,900
Total
$10,900
Net income
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sales. Long-term debt and equity are not. The company maintains a
constant 60 percent dividend payout ratio. As with every other firm
in its industry,...
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