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 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

The firm is operating at full capacity and no new debt or equity is issued. Calculate the pro forma income statement and balance sheet for the company. (Do not round intermediate calculations.)

What external financing is needed to support the 25 percent growth rate in sales? (Do not round intermediate calculations.)

The most recent financial statements for Retro Machine, Inc., follow. Sales for 2014 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

Explanation / Answer

External Financing required in the form of shorterm borrowings =22,710

RETRO MACHINE, INC. 2013 Income Statement Details Expresses as % to sales a b    Sales 100%    Costs 78%    Other expenses 3%    Earnings before interest and taxes 19%    Interest paid 2%    Taxable income 17%    Taxes (30%) 5%    Net income 12%    Dividends    Addition to retained earnings

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