Question

The 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				$	980,760
Costs					792,960
Other expenses					20,060
Earnings before interest and taxes				$	167,740
Interest paid					14,740
Taxable income				$	153,000
Taxes (21%)					32,130
Net income				$	120,870
Dividends	$	39,250
Addition to retained earnings		81,620

CROSBY, INC. Balance Sheet as of December 31, 2017
Assets				Liabilities and Owners’ Equity
Current assets				Current liabilities
Cash	$	27,920		Accounts payable	$	71,720
Accounts receivable		42,630		Notes payable		17,620
Inventory		95,910		Total	$	89,340
Total	$	166,460		Long-term debt	$	170,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	140,000
Net plant and equipment	$	455,980		Retained earnings		223,100
				Total	$	363,100
Total assets	$	622,440		Total liabilities and owners’ equity	$	622,440

Complete the pro forma income statements below. (Do not round intermediate calculations and round your answers to the nearest whole dollar amount, e.g., 32.)

for 20%, 30%, 35%  

  
  

Calculate the EFN for 20, 30, and 35 percent growth rates.

Answer 1

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