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.The most recent financial statements for Crosby, Inc., follow. Sales for 2018 are projected to grow by 30 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, INC. 2017 Income Statement |
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| Sales | $ | 773,000 | ||||
| Costs | 629,000 | |||||
| Other expenses | 34,000 | |||||
| Earnings before interest and taxes | $ | 110,000 | ||||
| Interest paid | 18,000 | |||||
| Taxable income | $ | 92,000 | ||||
| Taxes (25%) | 23,000 | |||||
| Net income | $ | 69,000 | ||||
| Dividends | $ | 19,240 | ||||
| Addition to retained earnings | 49,760 | |||||
| CROSBY, INC. Balance Sheet as of December 31, 2017 |
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| Assets | Liabilities and Owners’ Equity | ||||||
| Current assets | Current liabilities | ||||||
| Cash | $ | 26,240 | Accounts payable | $ | 65,400 | ||
| Accounts receivable | 35,760 | Notes payable | 20,600 | ||||
| Inventory | 72,320 | Total | $ | 86,000 | |||
| Total | $ | 134,320 | Long-term debt | $ | 121,000 | ||
| Owners’ equity | |||||||
| Fixed assets | Common stock and paid-in surplus | $ | 120,000 | ||||
| Net plant and equipment | $ | 230,000 | Retained earnings | 37,320 | |||
| Total | $ | 157,320 | |||||
| Total assets | $ | 364,320 | Total liabilities and owners’ equity | $ | 364,320 | ||
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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 dollar amount, e.g., 32.) |
