Prepare pro forma income statement-pro forma balance sheet

Assignment Help Financial Management

Reference no: EM131863092

Following are the income statement and balance sheet for Sandar Co.

Income Statement

Sales 60,000

Costs 40,000

Taxable income 20,000

Taxes (34%) 6,800

Net income 13,200

Dividends 5,280

Addition to Retained Earnings 7,920

Balance Sheet

Current Assets Current liabilities

Cash 6,100 Accounts Payable 2,600

Accounts receivables 13,800 Notes Payable 13,600

Inventory 15,200 Total 16200

Total 35,100 Long Term Debt 50,000

Fixed assets Owners’ Equity

Net plant and equipment 69,000 Common stock 30,000

Retained Earnings 7,900

Total assets 104,100 Total Liabilities and Owners’ Equity 104,100

A. Prepare a pro forma income statement and pro forma balance sheet, and calculate the EFN, on the basis of the following assumptions:

1. 25% growth in Sales,

2. Accounts payable vary with sales whereas all other liabilities remain unchanged.

3. There are no new common stocks issued.

4. The payout ratio is constant throughout the years.

B. Calculate the following:

1. Internal rate of growth.

2. Sustainable rate of growth.

Reference no: EM131863092

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