The most recent financial statements for Moose Tours, Inc., appear below. Sales

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

Payout ratio = 33840 / 84600 = 0.4

MOOSE TOURS, INC. Projected Income Statement for 2016 2015 2016   Sales $           7,58,000 $          9,09,600   Costs $           5,93,000 $          7,11,580   Other expenses $             14,000 $             16,828   Earnings before interest and taxes $           1,51,000 $          1,81,192   Interest expense $             10,000 $             10,000   Taxable income $           1,41,000 $          1,71,192   Taxes (40%) $             56,400 $             68,477   Net income $             84,600 $          1,02,715   Dividends (0.4) $             33,840 $             41,086   Addition to retained earnings $             50,760 $             61,629

Payout ratio = 33840 / 84600 = 0.4

Projected Balance Sheet as of December 31, 2016 Assets Liabilities and Owners’ Equity 2015 2016 2015 2016   Current assets:   Current liabilities:     Cash $     21,740 $       26,088     Accounts payable $       55,900 $       67,078     Accounts receivable $     34,060 $       40,872     Notes payable $       15,100 $       15,100     Inventory $     71,020 $       85,224       Total $       71,000 $       82,178       Total $ 1,26,820 $     1,52,184   Long-term debt $    1,02,000 $    1,02,000   Fixed assets   Owners’ equity     Net plant and equipment $ 2,75,000 $     3,30,000     Common stock and paid-in surplus $    1,02,000 $    1,02,000     Retained earnings $    1,26,820 $    1,88,449       Total $    2,28,820 $    3,92,449   Total assets $ 4,01,820 $     4,82,184   Total liabilities and owners’ equity $    4,01,820 $    4,74,627 New Retained Earnings = $ 1,26,820 + $ 61,629 = 1,88,449 EFN = Total Assets - Total Liabilities and equity EFN = $ 4,82,184 - $ 4,74,627 EFN = $ 7,557

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