im's Espresso expects sales to grow by 10.3% next year. Jim's changes its payout ratio from 90% to 75% of net income next year. When the payout ratio was 90%, there was excess financing in the amount of $4,199. Jim's developed the pro forma financial statements given here LOADING... to reflect the change in the payout ratio to 75%. How will the net new financing change? The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career. Income Statement Sales $228,078 Costs Except Depreciation (109,781) EBITDA $118,297 Depreciation (6,574) EBIT $111,723 Interest Expense (net) (474) Pretax Income $111,249 Income Tax (38,937) Net Income $72,312 Balance Sheet Assets Cash and Equivalents $16,446 Accounts Receivable 2,217 Inventories 4,335 Total Current Assets $22,998 Property, Plant and Equipment 11,118 Total Assets $34,116 Liabilities and Equity Accounts Payable $1,654 Debt 4,040 Total Liabilities $5,694 Stockholders' Equity $43,468 Total Liabilities and Equity $49,162

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter14: Capital Structure Management In Practice

Section: Chapter Questions

Problem 9P

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Related questions

Question

Jim's Espresso expects sales to grow by

10.3%

next year. Jim's changes its payout ratio from

90%

75%

of net income next year. When the payout ratio was

90%,

there was excess financing in the amount of

$4,199.

Jim's developed the pro forma financial statements given here

to reflect the change in the payout ratio to

75%.

How will the net new financing change?

The Tax Cuts and Jobs Act of 2017 temporarily allows 100% bonus depreciation (effectively expensing capital expenditures). However, we will still include depreciation forecasting in this chapter and in these problems in anticipation of the return of standard depreciation practices during your career.

Income Statement
Sales $228,078
Costs Except Depreciation (109,781)
EBITDA $118,297
Depreciation (6,574)
EBIT $111,723
Interest Expense (net) (474)
Pretax Income $111,249
Income Tax (38,937)
Net Income $72,312

Balance Sheet
Assets
Cash and Equivalents $16,446
Accounts Receivable 2,217
Inventories 4,335
Total Current Assets $22,998
Property, Plant and Equipment 11,118
Total Assets $34,116

Liabilities and Equity
Accounts Payable $1,654
Debt 4,040
Total Liabilities $5,694
Stockholders' Equity $43,468
Total Liabilities and Equity $49,162

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