Chapter 4
Question 16,17
Input area:
Output area:
Total fixed assets 514,193.75$
Chapter 4
Question 18
Input area:
Output area:
Plowback ratio 70%
Return on equity 16.43%
Sustainable growth rate 13%
Debt/equity ratio 1.20
Payout ratio 30%
Chapter 4
Question 19
Input area:
Output area:
Internal growth rate 6.5%
Payout ratio 25%
Profit margin 6.0%
Chapter 4
Question 20
Input area:
Output area:
Profit margin 5.3%
Total asset turnover 1.60
Total debt ratio 0.45
Payout ratio 30%
Net income 14,800$
Chapter 4
Question 22
Input area:
Output area:
Addition to RE 20,500$
Ending equity 165,500$
Plowback ratio 78.85%
ROE (beg. equity) 17.93%
ROE (ending equity) 15.71%
Equity for ROE)
Beginning equity 145,000$
Ending TA 275,000$
Net income 26,000$
Chapter 4
Question 23
Input area:
Output area:
Plowback ratio 78.85%
ROA (ending TA) 9.45%
Beginning TA 254,500$
Beginning ROA 10.22%
Beginning equity 145,000$
Ending TA 275,000$
Net income 26,000$
Chapter 4
Question 24
Output area:
Dividend payout ratio 0.30
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 18,240 Accounts receivable 39,072 Notes payable 13,600
Interest expense 11,200 Total 146,784$ Long-term debt 126,000
Taxable income 168,560$ Fixed assets
Add. To RE 76,695 Retained earnings 223,415
Input area:
Other expenses 15,200 Cash 20,240$ Accounts payable 54,400$
Interest expense 11,200 Inventory 69,520 Total 68,000$
Taxable income 138,600$ Total 122,320$ Long-term debt 126,000$
Add. to retained earnings 63,063 Retained earnings 146,720
Chapter 4
Question 25
Input area:
Output area:
Full capacity sales 928,750$
Fixed assets/sales at full capacity 0.35575
Total fixed assets 317,184$
Dividend payout ratio 0.30
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 18,240 Accounts receivable 39,072 Notes payable 13,600
Interest expense 11,200 Total 146,784$ Long-term debt 126,000
Taxable income 168,560$ Fixed assets
Add. To RE 76,695 Retained earnings 223,415
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 18,240 Accounts receivable 39,072 Notes payable 13,600
Interest expense 11,200 Total 146,784$ Long-term debt 126,000$
Taxable income 168,560$ Fixed assets
Add. To RE 76,695 Retained earnings 223,415
Other expenses 15,200 Cash 20,240$ Accounts payable 54,400$
Interest expense 11,200 Inventory 69,520 Total 68,000$
Taxable income 138,600$ Total 122,320$ Long-term debt 126,000$
Add. to retained earnings 63,063 Retained earnings 146,720
Sales increase 20.00% Total liabilities and
Chapter 4
Question 26
Input area:
Output area:
2011 Debt/equity ratio 0.7498
Debt-asset ratio 0.4285
Equity-asset ratio 0.5715
New total debt 251,509$
Increase in AP 10,880$
New LTD 46,629$
Excess debt raised 43,660$
Dividend payout ratio 0.30
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 18,240 Accounts receivable 39,072 Notes payable 13,600
Interest expense 11,200 Total 146,784$ Long-term debt 172,629$
Taxable income 168,560$ Fixed assets
Add. To RE 76,695 Retained earnings 223,415
Other expenses 15,200 Cash 20,240$ Accounts payable 54,400$
Interest expense 11,200 Inventory 69,520 Total 68,000$
Taxable income 138,600$ Total 122,320$ Long-term debt 126,000$
Sales increase 20.00% Total liabilities and
Chapter 4
Question 27
Input area:
Output area:
Dividend payout ratio 0.30
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 17,480 Accounts receivable 37,444 Notes payable 13,600
Interest expense 11,200 Total 140,668$ Long-term debt 126,000
Taxable income 161,070$ Fixed assets
Other expenses 15,200 Cash 20,240$ Accounts payable 54,400$
Interest expense 11,200 Inventory 69,520 Total 68,000$
Taxable income 138,600$ Total 122,320$ Long-term debt 126,000$
Add. to retained earnings 63,063 Retained earnings 146,720
Chapter 4
Question 28
Input area:
Output area:
2011 Debt/equity ratio 0.7498
Debt-asset ratio 0.4285
Equity-asset ratio 0.5715
New total debt 259,176$
Increase in AP 19,040$
New LTD 46,136$
Excess debt raised (6,358)$
Dividend payout ratio 0.30
2012 Pro Forma Income Statement Assets Liabilities and owners’ equity
Other expenses 20,520 Accounts receivable 43,956 Notes payable 13,600
Interest expense 11,200 Total 165,132$ Long-term debt 172,136$
Taxable income 191,030$ Fixed assets
Add. To RE 86,919 Retained earnings 233,639
Other expenses 15,200 Cash 20,240$ Accounts payable 54,400$
Interest expense 11,200 Inventory 69,520 Total 68,000$
Taxable income 138,600$ Total 122,320$ Long-term debt 126,000$
Add. to retained earnings 63,063 Retained earnings 146,720
Sales increase 35.00% Total liabilities and
Chapter 4
Question 29
Input area:
Output area:
Chapter 4
Question 30,31
Output area:
Internal growth rate:
EFN = 0 = -PM(S)b + [A – PM(S)b]g
g = [PM(S)b] / [A – PM(S)b]
Since ROA = NI / A = PM(S) / A, dividing numerator and denominator by A gives
g = [(PM(S)b) / A] / [(A – PM(S)b) / A]
External financing needed = Increase in assets – Addition to retained earnings
Increase in assets = A X g
Addition to retained earnings = (Net income X b) (1 + g)
Net income = PM(S)
Thus, EFN = A(g) – PM(S)b(1 + g)