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Executive Fruit?s financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%.

 

Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs.

 

a. Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the

 

required external financing (All figures are in thousands). (Enter your answers in thousands.)

 

Base Case

 


 

20% Growth

 


 

5% Growth

 


 

INCOME STATEMENT

 

Revenue

 


 

$

 


 

Cost of goods sold

 


 

EBIT

 


 

3,000

 


 

$

 


 

2,700

 


 

$

 


 

Interest

 


 

300

 


 

$

 


 

State and federal tax

 


 

Net income

 


 

$

 


 

144

 


 

48

 


 

$

 


 

300

 


 

2835

 


 

$

 

360

 


 

315

 


 

60

 


 

60

 


 

$

 

300

 


 

255

 


 

120

 


 

102

 


 

$

 


 

96

 


 

$

 


 

3240

 


 

$

 


 

96

 


 

Dividends

 


 

Retained earnings

 


 

240

 


 

3150

 


 

$

 


 

60

 


 

Earnings before taxes

 


 

$

 

3600

 


 

$

 

180

 


 

153

 


 

120

 


 

102

 


 

$

 


 

$

 

60

 


 

51

 


 

BALANCE SHEET

 

Assets

 

Net working capital

 

Fixed assets

 


 

Total assets

 


 

$

 


 

1,200

 


 

$

 


 

1,500

 


 

$

 


 

600

 


 

$

 

360

 


 

315

 


 

1440

 


 

1260

 


 

$

 


 

$

 

1800

 


 

1575

 


 

Liabilities and shareholders' equity

 

Long-term debt

 


 

$

 


 

$

 

600

 


 

600

 


 

Shareholders' equity

 

Total liabilities and shareholders'

 

equity

 


 

900

 


 

$

 


 

1,500

 


 

Required external financing

 


 

$

 


 

$

 


 

$

 


 

$

 


 

b. Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be

 

used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in

 

thousands.)

 

BALANCE SHEET

 

Base Case

 


 

20% Growth

 


 

5% Growth

 


 

Assets

 

Net working capital

 


 

$

 


 

Fixed assets

 


 

Total assets

 


 

300

 


 

$

 


 

1,500

 


 

$

 


 

600

 


 

315

 


 

1440

 


 

1,200

 


 

$

 


 

$

 

360

 


 

$

 


 

1260

 


 

$

 

1800

 


 

1575

 


 

Liabilities and shareholders' equity

 

Long-term debt

 

Shareholders' equity

 

Total liabilities and shareholders'

 

equity

 


 

$

 


 

$

 


 

900

 


 

$

 


 

1,500

 


 

$

 


 

$

 

1800

 


 

1575

 


 

 


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