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.