A2 1 g Use the following information for Delta Corporation to answer question 1: Year 20X1 20X2 Net sales $1,500,000 $1,656,598 Cost of goods sold 675,000 745,469 Depreciation 270,000 298,188 Interest paid 43,600 44,000 Cash 127,500 140,811 Accounts receivable 450,000 496,980 Inventory 525,000 579,809 Net fixed assets 1,800,000 1,987,918 Accounts payable 375,000 414,150 Notes payable 45,000 50,000 Long-term debt 500,000 500,000 Common stock 1,000,000 1,000,000 Retained earnings 982,500 1,241,368 Tax rate 35% 35% Dividend payout 30% 30% Delta has 600,000 common shares outstanding. The firm is projecting a 20% increase in net sales for the coming year (20X3). Delta uses the percentage of sales approach to plan for its financing needs. In using this approach, the firm assumes that cost of goods sold, all assets (current and fixed), and accounts payable will all remain a constant percentage of sales. Depreciation expense is assumed to be 15% of net fixed assets, while notes payable and long-term debt will remain at the same level as 20X2. The interest rate charged on notes payable and long-term debt is also expected to remain the same. The firm will aim to maintain its dividend payout of 30% for the foreseeable future. g. Assume that Delta is operating at 100% capacity. Calculate the EFN for the firm if it wants to grow its sales by 100% for 20X3. Interpret this EFN number.
A2 1 g
Use the following information for Delta Corporation to answer question 1:
|
Year |
20X1 |
20X2 |
|
Net sales |
$1,500,000 |
$1,656,598 |
|
Cost of goods sold |
675,000 |
745,469 |
|
|
270,000 |
298,188 |
|
Interest paid |
43,600 |
44,000 |
|
Cash |
127,500 |
140,811 |
|
|
450,000 |
496,980 |
|
Inventory |
525,000 |
579,809 |
|
Net fixed assets |
1,800,000 |
1,987,918 |
|
Accounts payable |
375,000 |
414,150 |
|
Notes payable |
45,000 |
50,000 |
|
Long-term debt |
500,000 |
500,000 |
|
Common stock |
1,000,000 |
1,000,000 |
|
|
982,500 |
1,241,368 |
|
Tax rate |
35% |
35% |
|
Dividend payout |
30% |
30% |
Delta has 600,000 common shares outstanding. The firm is projecting a 20% increase in net sales for the coming year (20X3). Delta uses the percentage of sales approach to plan for its financing needs. In using this approach, the firm assumes that cost of goods sold, all assets (current and fixed), and accounts payable will all remain a constant percentage of sales. Depreciation expense is assumed to be 15% of net fixed assets, while notes payable and long-term debt will remain at the same level as 20X2. The interest rate charged on notes payable and long-term debt is also expected to remain the same. The firm will aim to maintain its dividend payout of 30% for the foreseeable future.
g. Assume that Delta is operating at 100% capacity. Calculate the EFN for the firm if it wants to grow its sales by 100% for 20X3. Interpret this EFN number.
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