The most recent financial statements for Moose Tours, Inc., appear below. Sales
ID: 2741148 • Letter: T
Question
The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 20 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.
What is the EFN if the firm was operating at only 80 percent of capacity in 2015? Assume that fixed assets are sold so that the company has a 100 percent asset utilization. (A negative answer should be indicated by a minus sign. Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)
The most recent financial statements for Moose Tours, Inc., appear below. Sales for 2016 are projected to grow by 20 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.
Explanation / Answer
The problem has indicated income statements and balance sheets of 2015. In 2016 there is 20% growth in sales. As a result, cost of goods sold and other expenses will also grow at 20%. Interest, tax rate and dividend pay out ratio will remain the same. Considering these points following Income statement of 2016 has been prepared.
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Next is balance sheet. Here current assets and liabilities are also increased by 20%. Cash is the balancing figure. commo stock and long term debt has not changed. Fixed asset is used at 80% excess capacity asset is to be sold out for making 100% utilization. But in 2016, it will not be required. Due to 20% increase in sales, Asset is used in full capacity. So fixed asset value will not change. Considering this analysis, following balance sheet has been drawn.
Finally consider EFN. It is extra finacing needed in 2016. In order to calculateit, take changes in total assets. Deduct changes in current liabilities and retention of the year. Balance is EFN. It is shown below:
Answer: EFN=$28,400
Income statement 2016 Details Amount 1. Sales 909600 2. Costs 711600 3. Other expenses 16800 4. EBIT [1-2-3] 181200 5. Interest expenses 10,000 6. Taxable Income [4-5] 171,200 7. Taxes 40% of 6 68480 8. Net income [6-7] 102,720 9. Dividend [49.42% of 102,720] 50,760 10 Retention 81,960 Note: Dividend payout ratio [33840/68480] 0.4942