$6.$ Projected financial statements and basic analysis

You are the most creative analyst for Green Rabbit Transportation Inc., and your admirers want to see you work your analytical magic once more.

$2016$ Actual Results

$2017$ Initial Forecast

Net sales $$16,000$ $$24,000$

Cost of goods sold $(12,800)(19,200)$

Gross profit $$3,200$ $$4,800$

Fixed operating costs except depreciation $(800)(1,200)$

Depreciation $(320)(480)$

Earnings before interest and taxes $$2,080$ $$3,120$

Interest $(320)(320)$

Earnings before taxes $$1,760$ $$2,800$

Taxes $(704)(1,120)$

Net income $$1,0561,680$

Common dividends $(570\mathrm{.}24)(570\mathrm{.}24)$

Addition to retained earnings $$485\mathrm{.}76$ $$1,109\mathrm{.}76$

Earnings per share $$52\mathrm{.}8$ $$84$

Dividends per share $$28\mathrm{.}512$ $$28\mathrm{.}512$

Number of common shares $($millions$)20\mathrm{.}020\mathrm{.}0$

Which of the following are assumptions made by the initial income statement forecast? Check all that apply.

Green Rabbit Transportation Inc. will be issuing additional shares of common stock in the coming year.

The forecasted increase in net sales is $50\%.$

No excess capacity currently exists.

Spontaneously generated funds will sufficiently cover any financing needs.

Green Rabbit Transportation Inc. will be issuing additional debt in the coming year.

The cost of sales percentage for Green Rabbit Transportation Inc. will decrease due to economies of scale.

If Green Rabbit Transportation Inc. had neither a sufficient amount of excess capacity to handle forecasted increases in operations nor the level of retained earnings required to increase asset levels up to the necessary level for production, this difference would be referred to as and could be acquired in which of the following forms?

I. Issuing additional common stock

II$.$ Borrowing from a bank using notes payable

III. Issuing long$-$term bonds

I, II$,$ and III

Just II

I and II

I only

II and III

Just III