Question

Use the past 5 years' financial statements to construct a pro-forma income statements and balance sheet for Encompass Health (EHC) in 2020. Please use the following assumptions as forecast basis. Sales grow at last year's (2019) rate; No dividend paid in 2020 No change to shares outstanding in 2020 Cost of long term debt is 6% in 2020 In EHC's statements, Retained Earnings is called "Accumulated deficit"?

Answer 1

To construct a pro-forma income statement and balance sheet for Encompass Health in 2020, use the provided assumptions to project sales, expenses, and cost of long-term debt.

Step-by-step explanation:

To construct a pro-forma income statement for Encompass Health in 2020, we will use the assumptions provided. First, we will calculate the projected sales growth rate for 2020 by taking the growth rate from 2018 to 2019. Then, we will use this growth rate to determine the projected sales for 2020.

Next, we will calculate the projected cost of long-term debt for 2020 by applying the given interest rate to the long-term debt balance from the previous year.

Finally, we will use the projected sales, expenses, and cost of long-term debt to construct the pro-forma income statement and balance sheet for Encompass Health in 2020, applying the assumptions provided.