The most recent financial statements for Megan Corporation follow. Sales for 2021 are projected to increase...

  

 

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The most recent financial statements for Megan Corporation follow. Sales for 2021 are projected to increase by 20 percent. Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant dividend pay-out ratio. The firm is operating at full capacity and no new debt or equity is issued. 2020 Income Statement Balance Sheet as at 31 December 2020 Sales €31,600 Current assets €15,600 Current liabilities €8,400 Costs 22,000 Fixed assets 34,400 Long-term debt 14,800 Taxable income €9,600 Equity 26,800 Taxes (30%) 2,880 Total assets €50,000 Total liabilities & equity €25,000 Net income €6,720 Dividends €2,352 Instructions: a) Calculate internal and sustainable growth rates, and explain what they mean. (10 points) b) Prepare Proforma Income Statement for 2021, calculate dividends and addition to retained earnings in 2021. (10 points) c) Prepare Proforma Balance Sheet for 2021. (10 points) d) Calculate the amount of external financing needed in 2021, and explain what financing options are available for the company. (5 points) The most recent financial statements for Megan Corporation follow. Sales for 2021 are projected to increase by 20 percent. Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant dividend pay-out ratio. The firm is operating at full capacity and no new debt or equity is issued. 2020 Income Statement Balance Sheet as at 31 December 2020 Sales €31,600 Current assets €15,600 Current liabilities €8,400 Costs 22,000 Fixed assets 34,400 Long-term debt 14,800 Taxable income €9,600 Equity 26,800 Taxes (30%) 2,880 Total assets €50,000 Total liabilities & equity €25,000 Net income €6,720 Dividends €2,352 Instructions: a) Calculate internal and sustainable growth rates, and explain what they mean. (10 points) b) Prepare Proforma Income Statement for 2021, calculate dividends and addition to retained earnings in 2021. (10 points) c) Prepare Proforma Balance Sheet for 2021. (10 points) d) Calculate the amount of external financing needed in 2021, and explain what financing options are available for the company. (5 points)

Answer rating: 100% (QA)

a The internal growth rate and sustainable growth rate are both measures of a companys ability to grow its sales and earnings using internally generated funds without the need for external financing T... View the full answer