The most recent financial statements for Retro Machine, Inc., follow. Sales for

Question

The most recent financial statements for Retro Machine, Inc., follow. Sales for 2014 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 and accounts payable increase spontaneously with sales.

In 2013, the firm operated at 80 percent of capacity. Construct the pro forma income statement and balance sheet for the company. Assume that the company cannot sell fixed assets. This implies that asset utilization may remain less than 100 percent next year as well. (Do not round intermediate calculations.)

What is the EFN?

The most recent financial statements for Retro Machine, Inc., follow. Sales for 2014 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 and accounts payable increase spontaneously with sales.

Explanation / Answer

Answer:Income Statement

Balance sheet:

2013 2014 Particulars Amount ($) Amount ($) Sales 750850 901020 Less:costs 582450 698940 Less:Other expense 18350 22020 EBIT 150050 180060 Less: Interest paid 12100 12100 Taxable Income 137950 167960 Less: Taxes (40%) 55180 67184 Net income 82770 100776 Dividend 26997 32869.99724 Addition to retained earnings 55773 67906.00276

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