What did i do wrong? I got the majority of it right.. The Optical Scam Company h

Question

What did i do wrong? I got the majority of it right..

The Optical Scam Company has forecast a sales growth rate of 25 percent for next year. The current financial statements are shown here Income Statement $ 31,100,000 26,382,300 Sales Costs $ 4,717,700 1,651,195 Taxable income laxes Net income Dividends $ 3,066,505 $1,226,602 1.839,903 Addition to retained earnings Balance Sheet Assets Liabilities and Equity Current assets $ 7,270,000 Short-term debt Long-term debt $ 6,220,000 4,354,000 Fixed assets 17,299,000 Common stock $ 2,516,000 Accumulated retained earnings Total equity Total liabilities and equity 11,479,000 $ 13,995,000 $ 24,569,000 Total assets $24,569,000 a. Calculate the external financing needed for next year. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) External financing needed s 2287371 o b-1. Prepare the firm's pro forma balance sheet for next year. (Do not round intermediate calculations and round your answers to the nearest whole number, e.g., 32.) Balance Sheet Assets Liabilities and equity s7775000 4354000 $ 9087500 Short-term debt Long-term debt Current assets Fixed assets 21623750 Common stock Accumulated retained earnings $ 2516000 14085529 Total equity 16601529 Total assets S30711250Total liabilities and equity 28730529 b-2. Calculate the external financing needed. (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.) External financing needed $1980721 c. Calculate the sustainable growth rate for the company based on the current financial statements. (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.) Sustainable growth rate 15.14 2%

Explanation / Answer

Note:

Only (b-1) and (b-2) are incorrect. So let’s calculate these two.

(b-1).

Balance Sheet (For Next year)

Assets

Liabilities and Equity

Current assets

$9087500

Short-term debt

$7775000

Fixed assets

$21623750

Long-term debt

$4354000

Common stock

$2516000

Accumulated retained earnings

$13778879

Total equity

$16294879

External financing needed (Balancing figure)

$2287371

Total assets

$30711250

Total liabilities and equity

$30711250

Working Note;

1. Accumulated retained earnings will be calculated as follow;

Net income for next year ($3066505 * 1.25)

$3833131.25

Less; Dividends (40%)

($1533252.50)

Addition to retained earnings

$2299878.75

Add: Beginning balance of retained earnings

$11479000

Ending balance of retained earnings

$13778878.75

(b-2).

External financing needed = $2287371

Balance Sheet (For Next year)

Assets

Liabilities and Equity

Current assets

$9087500

Short-term debt

$7775000

Fixed assets

$21623750

Long-term debt

$4354000

Common stock

$2516000

Accumulated retained earnings

$13778879

Total equity

$16294879

External financing needed (Balancing figure)

$2287371

Total assets

$30711250

Total liabilities and equity

$30711250

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