1. Suppose Mick's is projecting a 20% increase in sales for the coming year, and that cost...
Question:
1. Suppose Mick's is projecting a 20% increase in sales for the coming year, and that cost of goods sold and general/administrative expenses remain a constant percentage of sales. Also assume that the amount of depreciation and interest paid and the firm's tax rate (35%) remain unchanged.
a. Create the Pro Forma Income Statement for 2005.
b. Assume the firm's dividend payout is 50%. What will the firm pay out in dividends in 2005?
2. Assume all information given in part A. Also, assume all assets and current liabilities arc proportional to sales but long-term debt and equity are not proportional to sales.
a. If the firm's tax rate remains unchanged, the dividend payout is 50%, what is the external financing needed (EFN) for 2006?
b. Create the Pro Forma Balance Sheet for 2005.
3. Given all the information in part A & B.
a. If the firm is only operating at 82% of capacity, what are full capacity sales?
b. what is the external financing needed (EFN) for 2005?
4. Suppose Mick's wishes to maintain a sustainable growth rate of 30% per year. Is this growth rate possible? What must the dividend payout ratio be to make this feasible?
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo-Ann L. Johnston, Peter R. Norwood