A company’s financial manager believes that sales in 2019 could rise by as much as 20%...

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Finance

A company’s financial manager believes that sales in 2019 couldrise by as much as 20% or by as little as 10%. Prepare thepro-forma financial statements under the two assumptions andcalculate external financing required. Then, determine thesustainable growth rate.
2018
2019 - 20% Growth
2019 – 10% Growth
Sales
$6,500
COGS
$3,500
SG&A
$2,350
Interest
$130
Tax
$280
Dividends
$280
Cash
$100
A/R
$400
Inventory
$650
PP&E
$2,600
A/P
$500
Long-term Debt
$1,300
Common Shares
$100
R/E
??

Answer & Explanation Solved by verified expert

4.2 Ratings (727 Votes)

AnsIn 20182019 20 Growth2019 10 GrowthSales650078007150COGS350042003850SGA235028202585Operating profit650780715Interest130130130Interest cost of long term See Answer

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Transcribed Image Text

A company’s financial manager believes that sales in 2019 couldrise by as much as 20% or by as little as 10%. Prepare thepro-forma financial statements under the two assumptions andcalculate external financing required. Then, determine thesustainable growth rate.20182019 - 20% Growth2019 – 10% GrowthSales$6,500COGS$3,500SG&A$2,350Interest$130Tax$280Dividends$280Cash$100A/R$400Inventory$650PP&E$2,600A/P$500Long-term Debt$1,300Common Shares$100R/E??

	2018	2019 - 20% Growth	2019 – 10% Growth
Sales	$6,500
COGS	$3,500
SG&A	$2,350
Interest	$130
Tax	$280
Dividends	$280
Cash	$100
A/R	$400
Inventory	$650
PP&E	$2,600
A/P	$500
Long-term Debt	$1,300
Common Shares	$100
R/E	??