The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales. CROSBY, INCORPORATED 2020 Income Statement Sales $ 755,000 Costs 611,000 Other expenses 25,000 Earnings before interest and taxes $ 119,000 Interest paid 10,800 Taxable income $ 108,200 Taxes (22%) 23,804 Net income $ 84,396 Dividends $ 31,840 Addition to retained earnings 52,556 CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets Liabilities and Owners’ Equity Current assets Current liabilities Cash $ 24,440 Accounts payable $ 58,200 Accounts receivable 33,780 Notes payable 15,200 Inventory 70,700 Total $ 73,400 Total $ 128,920 Long-term debt $ 103,000 Owners’ equity Fixed assets Common stock and paid-in surplus $ 102,000 Net plant and equipment $ 212,000 Retained earnings 62,520 Total $ 164,520 Total assets $ 340,920 Total liabilities and owners’ equity $ 340,920 What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P

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The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

CROSBY, INCORPORATED
2020 Income Statement
Sales		$ 755,000
Costs		611,000
Other expenses		25,000

Earnings before interest and taxes		$ 119,000
Interest paid		10,800

Taxable income		$ 108,200
Taxes (22%)		23,804

Net income		$ 84,396

Dividends	$ 31,840
Addition to retained earnings	52,556

CROSBY, INCORPORATED
Balance Sheet as of December 31, 2020
Assets		Liabilities and Owners’ Equity
Current assets		Current liabilities
Cash	$ 24,440	Accounts payable	$ 58,200
Accounts receivable	33,780	Notes payable	15,200

Inventory	70,700	Total	$ 73,400

Total	$ 128,920	Long-term debt	$ 103,000

		Owners’ equity
Fixed assets		Common stock and paid-in surplus	$ 102,000
Net plant and equipment	$ 212,000	Retained earnings	62,520

		Total	$ 164,520

Total assets	$ 340,920	Total liabilities and owners’ equity	$ 340,920

What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

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