2. Compute the external funds needs (EFN) in 2020, then balance the balance sheet using the assumptions below. The EFN = 0 when you are done. Income Statement 2019 2020 $ 1,000? S 500 ? 500 500 ? 250 ? 250 ? $ 63 ? $ 188 ? Sales Operating costs EBIT Interest EBT Tax Net Income 2020 Pro Forma Assumptions 35% Sales Growth 5% Interest on Debt "Applied to Current Year Balance" 25% Tax Rate 40% Payout Ratio Operating costs, Assets, and Accounts Payable grow at same growth rate as sales Payoff (Reduce) Debt by $1000 in 2020 Finance any EFN with stock issuance, or use stock repurchase if there are excess funds 2020 Balance Sheet 2019 $ 1,000 ? $ 12,000 ? $ 1,000 ? $ 5,000 $ 3,000 ? $ 4,000 ? Current Assets Net Fixed Assets Account Payable Debt Common Stock Retained Earnings