1. Fire Corp financial statements:

Pro forma income statement Pro forma balance sheet

Sales $ 32000 Assets $ 25300 Debt $ 5800

Costs 24400 Equity 19500

Net income $ 7600 Total $ 25,300 Total $25,300

It expects 15% sales increase. It also predicts every item on the balance sheet will increase by 15% as well. It currently pays no dividend.

1. Create the pro forma income statement and balance sheet with the new sales level.
2. Whats the retained earnings? and new equity level?
3. With no dividend, debt is the plug variable. whats the new debt level?
4. If Fire Corp decides to pay half of income as dividend, cost and assets vary with sales, but not debt and equity, whats the EFN?