The most recent financial statements for Reply, Inc., are shown here: Income Sta
ID: 2764049 • Letter: T
Question
The most recent financial statements for Reply, Inc., are shown here: Income Statement Balance Sheet Sales $ 23,400 Assets $ 52,500 Debt $ 20,100 Costs 15,200 Equity 32,400 Taxable income $ 8,200 Total $ 52,500 Total $ 52,500 Taxes (40%) 3,280 Net income $ 4,920 Assets and costs are proportional to sales. Debt and equity are not. A dividend of $1,700 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to be $26,910. What is the external financing needed? (Do not round intermediate calculations.)
Explanation / Answer
Pro forma income statement Sales 23400*1.15 26910 Costs 15200*1.15 17480 EBIT 9430 TAX 3772 Net income 5658 Dividend 1955.00 tranfered to retained earnning 3703.00 Workings % of increase in sales =+(26910-23400)/23400 15.00% Dividends 1700*5658/4920 1955 Pro forma balance sheet Assets 52500*1.15 60375 Total assets 60375 Debt 20100 Equity (32400+3703) 36103 Total liabilities and equity 56203 EFN = Total assets Total liabilities and equity 60375-56203 4172