Income Statement Yr 0 1st Pass Forecast Year 2nd Pass Forecast Year Sales $ 7000 8750 8750 CGS 6000 7500 7500 Depr 400 1.25 500 500 EBIT $ 600 750 750 Interest 200 200 34.2 234.2 EBT $ 400 550 584 Taxes (25%) 100 100 100 Net Income $ 300 450 684 Div 200 200 11 211 Add to RE $ 100 250 Balance Sheet Total Assets $3420 4275 4275 AP $ 70x1.25 87.5 87.5 NP 80 80 80 Accrued Wages 70x1.25 87.5 87.5 Current Liab $ 220 $255 $255 LTD 1000 1000 285 1285 Common Stock 1000 1000 285 1285 Retained Earnings 1200 + 250 1450 Total Common Eq $ 2200 $2450 T. Liab & Equity $ 3420 $3705
Added by Albert M.
Close
Step 1
To calculate the proforma income statement and balance sheet, we need to use the constant growth method and assume the company is at full capacity with a 25% growth rate. We also need to assume that additional funds needed will come from 50% LTD and 50% from a Show more…
Show all steps
Your feedback will help us improve your experience
Akash M and 87 other Principles of Accounting educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Recommended Videos
Supreeta N.
A firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of capital Target market proportions Long-term debt 30% Preferred stock 5% Common stock equity 65% Debt: The firm can sell a 20-year, RM1,000 par value, 9% bond for RM980. A flotation cost of 2% of the face value would be required in addition to the discount of RM20. Preferred stock: The firm has determined it can issue preferred stock at RM65 per share par value. The stock will pay an RM8.00 annual dividend. The cost of issuing and selling the stock is RM3 per share. Common stock: The firm's common stock is currently selling for RM40 per share. The dividend expected to be paid at the end of the coming year is RM5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was RM3.45. It is expected to sell a new common stock issue must be underpriced at RM1 per share, and the firm must pay RM1 per share in flotation costs. Additionally, the firm's marginal tax rate is 40%. Calculate the firm's weighted average cost of capital assuming the firm has exhausted all retained earnings.
Akash M.
Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT). The company's operating costs (excluding depreciation and amortization) remain at 70% of net sales, and its depreciation and amortization expenses remain constant from year to year. The company's tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT). In Year 2, Cold Goose expects to pay $200,000 and $1,922,063 of preferred and common stock dividends, respectively. Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar. Cold Goose Metal Works Inc. Income Statement for Year Ending December 31 Year 1 Year 2 (Forecasted) Net sales $30,000,000 Less: Operating costs, except depreciation and amortization $21,000,000 Less: Depreciation and amortization expenses $1,200,000 $1,200,000 Operating income (or EBIT) $7,800,000 Less: Interest expense $780,000 Pre-tax income (or EBT) $7,020,000 Less: Taxes (25%) $1,755,000 Earnings after taxes $5,265,000 Less: Preferred stock dividends $200,000 Earnings available to common shareholders $5,065,000 Less: Common stock dividends $1,579,500 Contribution to retained earnings $3,485,500 $4,284,812 Given the results of the previous income statement calculations, complete the following statements: • In Year 2, if Cold Goose has 5,000 shares of preferred stock issued and outstanding, then each preferred share should expect to receive ?? in annual dividends. • If Cold Goose has 400,000 shares of common stock issued and outstanding, then the firm's earnings per share (EPS) is expected to change from ?? in Year 1 to ?? in Year 2. • Cold Goose's earnings before interest, taxes, depreciation and amortization (EBITDA) value changed from ?? in Year 1 to ?? in Year 2. • It is ?? to say that Cold Goose's net inflows and outflows of cash at the end of Years 1 and 2 are equal to the company's annual contribution to retained earnings, $3,485,500 and $4,284,812, respectively. This is because ?? of the items reported in the income statement involve payments and receipts of cash.
Recommended Textbooks
Horngren’s Cost Accounting
Cost Accounting A Managerial Emphasis
Principles of Accounting Volume 1: Financial Accounting
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD