Question
In: Accounting
Consider the following recent financials for XYZ Corporation: Income Statement Balance Sheet Sales 73,802 Assets 209,087...
Consider the following recent financials for XYZ Corporation:
|
Income Statement |
Balance Sheet |
||||
|
Sales |
73,802 |
Assets |
209,087 |
Debt |
38,278 |
|
Costs |
44,281 |
Equity |
170,809 |
||
|
EBIT |
29,521 |
||||
|
Taxes @ 38% |
11,218 |
Total |
209,087 |
Total |
209,087 |
|
Net Income |
18,303 |
||||
Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,907 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to grow by 25%.
What is the pro-forma value for equity? (Round answer to 2 decimal places. Do not round intermediate calculations).
What is the external financing needed using the pro-forma approach? (Round answer to 2 decimal places. Do not round intermediate calculations).
What is the internal growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).
What is the sustainable growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).
Solutions
Expert Solution
| Income Statement | % | Balance Sheet | ||||
| Sales | 73,802 | 100% | Assets | 209,087 | Debt | 38,278 |
| Costs | 44,281 | 60% | Equity | 170,809 | ||
| EBIT | 29,521 | 40% | ||||
| Taxes @ 38% | 11,218 | 15.20% | Total | 209,087 | Total | 209,087 |
| Net Income | 18,303 | 24.80% | ||||
| Dividend | 2,907 | |||||
| Payout ratio | 15.88264% | Asset T/O | 35.297269% | |||
| (sales/TA) | ||||||
| Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: | ||||||
| Proforma | Proforma | |||||
| Income Statement | balance sheet | |||||
| Sales (73802 x 125%) | $ 92,252.50 | Assets (92252.50/35.297269%) | $261,358.75 | Debt (261358.75-190053.89) |
71,304.86 | |
| Costs (60% of sales) | 55,351.50 | Equity | 190,053.89 | |||
| EBIT | $ 36,901.00 | (170809+19244.89) | ||||
| Taxes @ 38% | 14,022.38 | Total | 261,358.75 | Total | 261,358.75 | |
| Net Income | $ 22,878.62 | |||||
| Dividend (15.88264%) | 3,633.73 | |||||
| Addition to Equity | $ 19,244.89 | EFN Needed | 33026.86 | |||
| (71304.86-38278) | ||||||
| Internal Growth rate = (ROA x b) / [1-(ROA xb) | ||||||
| ROA = NI/TA | 18303/209087 | |||||
| 0.087537724 | ||||||
| b = 1-payout ratio | 84.117358% | |||||
| Internal Growth rate = | (.087537724 x 84.117358%) / [1-(.087537724 x 84.117358%)] | |||||
| 7.95% | ||||||
| Sustainable Growth rate = (ROE x b) / [1-(ROE xb) | ||||||
| ROE = NI/TE | 18303/170809 | |||||
| 0.107154775 | ||||||
| b = 1-payout ratio | 84.117358% | |||||
| Sustainable Growth rate = | (.107154775 x 84.117358%) / [1-(.087537724 x 84.117358%)] | |||||
| 9.73% | ||||||
| Ans. | ||||||
| a. | 190,053.89 | |||||
| b. | 33026.86 | |||||
| c. | 7.95% | |||||
| d. | 9.73% | |||||
| Note: I have tried my best for correct solution, still you need any further help or answer mismatch | ||||||
| Please ask in comment, I appreciate your feedback, Thank you. | ||||||
ekkarill92 answered 1 year agoRelated Solutions
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$10,000.00
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$6,600.00
$6,000.00
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$500.00
EBIT
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$1,200.00
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$30,000.00
Total Assets
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Current Liabilities
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$8,000.00
Long-term debt
$12,728.00
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$20,000.00
Shareholder Equity
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