Creative Analysis, Inc. is currently operating at 70 percent of capacity. All costs and net working capital vary directly with sales. The tax rate, the profit margin, and the dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 10%? 

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The following Income Statement and Balance Sheet should be used: Creative Analysis, Inc. 2015 Income Statement Net sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable Income Taxes Net Income Dividends Addition to retained earnings Cash Accounts Rec Inventory Total Net fixed assets Total assets Creative Analysis, Inc. 2015 Balance Sheet Select one: a $1,933.28 b. $237.60 c $1,870.00 d. $356.40 $1,600 Accounts Payable 975)Long-term debt 2,425 Common stock $5,000 Retained earnings 2,200 $7,200 Total Liabilities & equity $8,500 7,210 400 890 40 $850 310 $540 $324 $216 $2,075 425 3,000 1,700 $7,200 Assume the profit margin and the dividend payout ratio of Creative Analysis, Inc. are constant. If sales increase by 8 percent, what is the pro forma retained earnings? The following Income Statement and Balance Sheet should be used: Creative Analysis, Inc. 2015 Income Statement Net sales Cost of goods sold Depreciation Earnings before interest and taxes Interest paid Taxable Income Taxes Net Income Dividends Addition to retained earnings Cash Accounts Rec Inventory Total Net fixed assets Total assets Creative Analysis, Inc. 2015 Balance Sheet Select one: a $1,933.28 b. $237.60 c $1,870.00 d. $356.40 $1,600 Accounts Payable 975)Long-term debt 2,425 Common stock $5,000 Retained earnings 2,200 $7,200 Total Liabilities & equity $8,500 7,210 400 890 40 $850 310 $540 $324 $216 $2,075 425 3,000 1,700 $7,200 Assume the profit margin and the dividend payout ratio of Creative Analysis, Inc. are constant. If sales increase by 8 percent, what is the pro forma retained earnings?

Answer rating: 100% (QA)

SOLUTION To calculate the pro forma retained earnings we need to first calculate the projected incom... View the full answer