Consider the following recent financials for XYZ Corporation

Consider the following recent financials for XYZ Corporation:

Income Statement

Balance Sheet

Sales

73,802

Assets

209,087

Debt

38,278

Costs

44,281

Equity

170,809

EBIT

29,521

Taxes @ 38%

11,218

Total

209,087

Total

209,087

Net Income

18,303

    

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $2,907 was paid, and the company wishes to maintain a constant payout ratio. Next year’s sales are projected to grow by 25%.

What is the pro-forma value for equity? (Round answer to 2 decimal places. Do not round intermediate calculations).

What is the external financing needed using the pro-forma approach? (Round answer to 2 decimal places. Do not round intermediate calculations).

What is the internal growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).

What is the sustainable growth rate? (Report answer in percentage terms and round to 2 decimal places. Do not round intermediate calculations).

Income Statement	Balance Sheet
Sales	73,802	Assets	209,087	Debt	38,278
Costs	44,281			Equity	170,809
EBIT	29,521
Taxes @ 38%	11,218	Total	209,087	Total	209,087
Net Income	18,303

Solution

Income Statement % Balance Sheet Sales 73,802 100% Assets 209,087 Debt 38,278 Costs 44,281 60% Equity 170,809 EBIT 29,521 40% Taxes @ 38% 11,218 15.20% Total 209,087 Total 209,087 Net Income 18,303 24.80% Dividend 2,907 Payout ratio 15.88264% Asset T/O 35.297269% (sales/TA) Assuming costs and assets increase proportionally, the pro forma financial statements will look like this: Proforma Proforma Income Statement balance sheet Sales (73802 x 125%) $              92,252.50 Assets (92252.50/35.297269%) $261,358.75 Debt (261358.75-190053.89) 71,304.86 Costs (60% of sales)                  55,351.50 Equity 190,053.89 EBIT $              36,901.00 (170809+19244.89) Taxes @ 38%                  14,022.38 Total 261,358.75 Total 261,358.75 Net Income $              22,878.62 Dividend (15.88264%)                             3,633.73 Addition to Equity $                      19,244.89 EFN Needed 33026.86 (71304.86-38278) Internal Growth rate = (ROA x b) / [1-(ROA xb) ROA = NI/TA 18303/209087 0.087537724 b = 1-payout ratio 84.117358% Internal Growth rate = (.087537724 x 84.117358%) / [1-(.087537724 x 84.117358%)] 7.95% Sustainable Growth rate = (ROE x b) / [1-(ROE xb) ROE = NI/TE 18303/170809 0.107154775 b = 1-payout ratio 84.117358% Sustainable Growth rate = (.107154775 x 84.117358%) / [1-(.087537724 x 84.117358%)] 9.73% Ans. a. 190,053.89 b. 33026.86 c. 7.95% d. 9.73% Note: I have tried my best for correct solution, still you need any further help or answer mismatch Please ask in comment, I appreciate your feedback, Thank you.