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The following are the balance sheet and income statements for the year that just ended:
Sales 1,400
Operating Costs 1,150
EBIT 250
Interest 20
EBT 230
Taxes (30%) 69
Net income 161
Dividend 0
Cash
60
Accounts payable
50
Account receivable
80
Notes payable
70
Inventories
100
Long-term debt
150
Fixed assets
250
Common stock
50
Retained earnings
170
Total assets
490
Total liabilities & equity
490
Fixed assets are being used at full capacity and can be increased only by increments of 50%. Sales for the next year are expected to increase by 30%.
Use the percent of sales method to construct a first pass pro forma income statement and balance sheet. For the second pass, assume that all the additional needed funds will come in the form of notes payable at an interest rate of 8%.
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Solution Summary
The solution explains how to prepare proforma financial statements using additional funds needed
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