Question

Question: The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are proj...

The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by either 20, 25, or 30 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.

    

MOOSE TOURS, INC. 2015 Income Statement
Sales				$	753,000
Costs					588,000
Other expenses					24,000
Earnings before interest and taxes				$	141,000
Interest expense					10,000
Taxable income				$	131,000
Taxes (40%)					52,400
Net income				$	78,600
Dividends	$	31,440
Addition to retained earnings		47,160

   

MOOSE TOURS, INC. Balance Sheet as of December 31, 2015
Assets				Liabilities and Owners' Equity
Current assets				Current liabilities
Cash	$	21,240		Accounts payable	$	55,400
Accounts receivable		33,560		Notes payable		14,600
Inventory		70,520
				Total	$	70,000
Total	$	125,320		Long-term debt	$	101,000
				Owners’ equity
Fixed assets				Common stock and paid-in surplus	$	100,000
Net plant and equipment	$	150,400		Retained earnings		4,720
				Total	$	104,720
Total assets	$	275,720		Total liabilities and owners' equity	$	275,720

    

Complete the pro forma income statements below. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.)

      

MOOSE TOURS, INC. Pro Forma Income Statement
		20 % Sales Growth			25 % Sales Growth			30 % Sales Growth
Sales	$			$			$
Costs
Other expenses
EBIT	$			$			$
Interest
Taxable income	$			$			$
Taxes (40%)
Net income	$			$			$
Dividends	$			$			$
Add to RE

      

Calculate the EFN for 20, 25, and 30 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 number, e.g., 32.)

    

	20%	25%	30%
EFN	$	$	$

Answer 1

MOOSE TOURS INC.
INCOME STATEMENT
	2015	2016
		20%	25%	30%
Sales	753000	903600	941250	978900
Costs	588000	705600	735000	764400
Other expenses	24000	28800	30000	31200
Earnings before interest and taxes	141000	169200	176250	183300
Interest expense	10000	10000	10000	10000
Taxable income	131000	159200	166250	173300
Taxes - 40%	52400	63680	66500	69320
Net Income	78600	95520	99750	103980
Dividends	31440	38208	39900	41592
Additions to retained earnings	47160	57312	59850	62388
Current Assets	125320	25064	31330	37596
Fixed Assets	150400	30080	37600	45120
Total Assets	275720	55144	68930	82716
Less:
Accounts Payable	55400	11080	13850	16620
Additions to retained earnings		57312	59850	62388
EFN		-13248	-4770	3708