Question

e most recent financial statements for Crosby, Inc., follow. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. Assume the firm is operating at full capacity and the debt-equity ratio is held constant.

CROSBY, INC. 2017 Income Statement
Sales				$	770,000
Costs					626,000
Other expenses					32,500
Earnings before interest and taxes				$	111,500
Interest paid					16,800
Taxable income				$	94,700
Taxes (22%)					20,834
Net income				$	73,866
Dividends	$	32,940
Addition to retained earnings		40,926

CROSBY, INC. Balance Sheet as of December 31, 2017
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	25,940		Accounts payable	$	64,200
Accounts receivable		35,430		Notes payable		19,700
Inventory		72,050		Total	$	83,900
Total	$	133,420		Long-term debt	$	118,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	113,000
Net plant and equipment	$	227,000		Retained earnings		45,520
				Total	$	158,520
Total assets	$	360,420		Total liabilities and owners’ equity	$	360,420

Complete the pro forma income statements below. (Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.)

Calculate the EFN for 10, 15 and 40 percent growth rates. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)

Answer 1