Problem 4-27 EFN and Internal Growth [LO2, 3]

The most recent financial statements for Crosby, Inc., follow. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

CROSBY, INC. 2017 Income Statement
Sales				$	773,000
Costs					629,000
Other expenses					34,000
Earnings before interest and taxes				$	110,000
Interest paid					18,000
Taxable income				$	92,000
Taxes (25%)					23,000
Net income				$	69,000
Dividends	$	19,240
Addition to retained earnings		49,760

CROSBY, INC. Balance Sheet as of December 31, 2017
Assets				Liabilities and Owners Equity
Current assets				Current liabilities
Cash	$	26,240		Accounts payable	$	65,400
Accounts receivable		35,760		Notes payable		20,600
Inventory		72,320		Total	$	86,000
Total	$	134,320		Long-term debt	$	121,000
				Owners equity
Fixed assets				Common stock and paid-in surplus	$	116,000
Net plant and equipment	$	230,000		Retained earnings		41,320
				Total	$	157,320
Total assets	$	364,320		Total liabilities and owners equity	$	364,320

Complete the pro forma income statements below. (Input all answers as positive values. Do not round intermediate calculations.)

Pro Forma Income Statement
	20% Sales Growth	25% Sales Growth	30% Sales Growth
Sales
Costs
Other expenses
EBIT
Interest paid
Taxable income
Taxes
Net income
Dividends
Add to RE

Calculate the EFN for 20, 25 and 30 percent growth rates. (Do not round intermediate calculations. A negative answer should be indicated by a minus sign.)