Question

The most recent financial statements for Fleury Inc., follow. Sales for 2012 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, fixed assets, and accounts payable increase spontaneously with sales.

Fleury,Inc.
2011 Income Statement
Sales $751,000
Costs $586,000
Other expenses $22,000
Earnings before interest and taxes $143,000
Interest paid $18,000
Taxable income $125,000
Taxes (40%) $50,000
Net Income $75,000
Dividends $30,000
Addition to retained earnings $45,000
Fleury,Inc
Balance Sheet of December 31,2011
Assets Liabilities and owners' Equity
Current Assets Current liabilities
Cash $21,040 Accounts payable $55,200
Accounts receivable $33,360 notes payable $14,400
Inventory $70,320 Total $69,600
Total $124,720 Long -term debt $134,000
Fixed Assets owners' Equity
Net plant and equipment $240,000 Common Stock and paid-in surplus $120,000
Retained Earnings $41,120
Total Assets $364,720 Total liabilities and owners' Equity $364,720
What is the EFN if the firm was operating at only 80 percent of capacity in 2011? Assume that fixed assets are sold so that the company has a 100 percent asset utilization.

Answer 1

Step-by-step explanation:

Present 20% growth

Sales 751,000 901,200

Cost 586,000 703,200

Other Expenses 22,000 26,400

EBIT 143,000 171,600

Interest paid 18,000 18,000

Taxable income 125,000 153,600

Taxes 50,000 61,440

Net income 75,000 92160

Dividends 30,000 36,864

Transfer to retained Earn 45,000 55,296

The new retained earning = 55,296+41,120 = 96,416

Proforma Balanced sheet

Current asset

Cash = 21040*1.2 25,248

Account receivables 33,360*1.2 40,032

Inventory 70,320*1.2 84,384

Total 149,664

Non current asset

Fixed asset

Plant & equipment 240000*1.2 288,000

Total assets 437,664

Total Liabilities & owners equity

Current liabilities

Accounts payable= 55,200*1.2 66,240

Note payable 14,400

Total current liabilities 80,640

Non current liabilities

Long term debts 134,000

Total non current liabilities 134,000

Shareholders equity

Common stock 120,000

Retained earnings 96,416

Total shareholder equity 216,416

Total liabilities & equities 431,056

EFN = total asset - total liabilities

437,664 - 431,056 =$ 6,608