The most recent financial statements for Crosby. Inc., follow. Sales for 2018 are projected to grow by 30percent. Interest expense will remain constantco; the tax rate and the dividend payout rate will also remainother expenses, current assets, fixed assets, and accounts payable increaseCosts,usly with sales.CROSBY, INC2017 Income StatementSaiesCostsOther expenses$765,000621.00030,000Earnings before interest and taxesInterest paids 114.0004,800Taxable incomeTaxes (22%)$ 99,20021,824Net incomes 77,378DividendsAddition to retained earnings5 24.84052,536CROSBY. INCBalance Sheet as of December 31, 2017AssetsLiabilities and Owners' EquityCurrent sssetsCurrent liabilitiesCashAccounts receivables 25,440 Accounts paysbles 62.20034.880 Notes payable18,200S 80,400s 113,000Inventory71.600 TotalTotal$ 131.920Long-term debtOwners equityFixed assetsCommon stock and paid-in surplusRetained earningsNet plant and equipment$222.000112.00048.520S 180,5205353.920TotalTotal assets5 253.920Total liabilities and owners equityWhat is the EFN f the firm wishes to keep its debt-equity ratio constant? (Do not round intermediatecalculations and round your answer to the nearest whole dollar amount, e.g 32.)EFN

Question
Asked Feb 12, 2019
The most recent financial statements for Crosby. Inc., follow. Sales for 2018 are projected to grow by 30
percent. Interest expense will remain constant
co
; the tax rate and the dividend payout rate will also remain
other expenses, current assets, fixed assets, and accounts payable increase
Costs,
usly with sales.
CROSBY, INC
2017 Income Statement
Saies
Costs
Other expenses
$765,000
621.000
30,000
Earnings before interest and taxes
Interest paid
s 114.000
4,800
Taxable income
Taxes (22%)
$ 99,200
21,824
Net income
s 77,378
Dividends
Addition to retained earnings
5 24.840
52,536
CROSBY. INC
Balance Sheet as of December 31, 2017
Assets
Liabilities and Owners' Equity
Current sssets
Current liabilities
Cash
Accounts receivable
s 25,440 Accounts paysble
s 62.200
34.880 Notes payable
18,200
S 80,400
s 113,000
Inventory
71.600 Total
Total
$ 131.920
Long-term debt
Owners equity
Fixed assets
Common stock and paid-in surplus
Retained earnings
Net plant and equipment
$222.000
112.000
48.520
S 180,520
5353.920
Total
Total assets
5 253.920
Total liabilities and owners equity
What is the EFN f the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate
calculations and round your answer to the nearest whole dollar amount, e.g 32.)
EFN
help_outline

Image Transcriptionclose

The most recent financial statements for Crosby. Inc., follow. Sales for 2018 are projected to grow by 30 percent. Interest expense will remain constant co ; the tax rate and the dividend payout rate will also remain other expenses, current assets, fixed assets, and accounts payable increase Costs, usly with sales. CROSBY, INC 2017 Income Statement Saies Costs Other expenses $765,000 621.000 30,000 Earnings before interest and taxes Interest paid s 114.000 4,800 Taxable income Taxes (22%) $ 99,200 21,824 Net income s 77,378 Dividends Addition to retained earnings 5 24.840 52,536 CROSBY. INC Balance Sheet as of December 31, 2017 Assets Liabilities and Owners' Equity Current sssets Current liabilities Cash Accounts receivable s 25,440 Accounts paysble s 62.200 34.880 Notes payable 18,200 S 80,400 s 113,000 Inventory 71.600 Total Total $ 131.920 Long-term debt Owners equity Fixed assets Common stock and paid-in surplus Retained earnings Net plant and equipment $222.000 112.000 48.520 S 180,520 5353.920 Total Total assets 5 253.920 Total liabilities and owners equity What is the EFN f the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole dollar amount, e.g 32.) EFN

fullscreen
check_circleExpert Solution
Step 1

 EFN = (A/S) x (Δ Sales) - (L/S) x (Δ Sales) - (PM x FS x (1-d))

A= Assets last year, S= Sales last year* change in sales= 353,920/765,000*(229,500)=.46*229,500=106,176

L=liabilities last year= 113,000+80,400= L/S= 193,400/765,000=0.25*229,500= 58,020

PM*FS= Net Income /Sales* Forecasted Sales (1- .76) = .10*994,500(1-0.76)= 23,868

Hence, 106,176-58,020-23868= 24,288

...
fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour*

See Solution
*Response times may vary by subject and question
Tagged in

Business

Finance

Related Finance Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Grill Works and More has 8 percent preferred stock outstanding that is currently selling for $49 a s...

A: Calculation of Cost of Preferred Stock:

question_answer

Q: Hankins Corporation has 8.9 million shares of common stock outstanding, 640,000 shares of 7.4 percen...

A: Calculating the value of after-tax cost of capital. We have,Cost of debt is calculating by the calcu...

question_answer

Q: Let C be the price of a call option that enables its holder to buy one share of a stock at an exerci...

A: Given that, K is the exercise price, S is stock price at time 0.

question_answer

Q: Use the following information: Debt: $79,000,000 book value outstanding. The debt is trading at 94% ...

A: Calculation of Total Market Value:

question_answer

Q: Why should a real estate listing contract be in writing and what are the essential elements of a lis...

A: Real estate contracts refer to legal aggreement between different parties. It is enforceable by law ...

question_answer

Q: David's Watersports Firm is considering a public offering of common stock. Its investment banker has...

A: Calculating the spread on this issue in percentage terms. We havePercentage spread = (Retail price –...

question_answer

Q: Consider a project to produce solar water heaters. It requires a $10 million investment and offers a...

A: a.Calculation of Present Value of Interest Tax Shield:Excel Spreadsheet:

question_answer

Q: Suppose that Sudbury Mechanical Drifters is proposing to invest $10.8 million in a new factory. It c...

A: Part (a)Annual depreciation rate under straight line method = 1 / useful life = 1/10 = 10%Hence, ann...

question_answer

Q: Consider the following two projects: cash flows     Project A      Project B c0                     ...

A: Hi. As per the guidelines we are allowed to answer the first four parts of a sub-part question. Kind...