Question

The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 25 percent. 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.

CROSBY, INC. 2017 Income Statement
Sales				$	758,000
Costs					614,000
Other expenses					26,500
Earnings before interest and taxes				$	117,500
Interest paid					12,000
Taxable income				$	105,500
Taxes (25%)					26,375
Net income				$	79,125
Dividends	$	29,740
Addition to retained earnings		49,385

CROSBY, INC. Balance Sheet as of December 31, 2017
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	24,740		Accounts payable	$	59,400
Accounts receivable		34,110		Notes payable		16,100
Inventory		70,970		Total	$	75,500
Total	$	129,820		Long-term debt	$	106,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	105,000
Net plant and equipment	$	215,000		Retained earnings		58,320
				Total	$	163,320
Total assets	$	344,820		Total liabilities and owners’ equity	$	344,820

What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g., 32.)

Answer 1