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Fixed assets must be increased in specific amounts because it is impossible, as a practical

matter, to buy part of a new plant or machine. Assume Nabors, Inc. is currently producing at 100 percent capacity. As a result, to increase production, the company must set up an entirely new line at a cost of $10,000. What would be the EFN in 2020 if the company plans to operate at sustainable growth rate? What does this imply about capacity utilization for next year?

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1. Following are the Income Statement and comparative Balance Sheets of Nabors, Inc. Nabors, Inc. 2019 Income Statement ($ in millions) Net sales $9,610 Less: Cost of goods sold 6,310 Less: Depreciation 1.370 Earnings before interest and taxes 1,930 Less: Interest paid 630 Taxable income 1,300 Less: Taxes 455 Net income $845 Nabors, Inc. 2018 and 2019 Balance Sheets ($ in millions) 2018 2019 2018 2019 Cash. $310 $405 Accounts payable $2,720 $2,570 Accounts rec. 2,640 3,055 Notes payable. 100 0 Inventory 3,275 3,850 Long-term debt 7,875 8,100 Net fixed assets 10,960 10,670 Common stock 5,000 5,250 Retained earnings 1,490 2.060 Total assets $17,185 $17,980 Total liab.& equity $17,185 $17,980 1. Following are the Income Statement and comparative Balance Sheets of Nabors, Inc. Nabors, Inc. 2019 Income Statement ($ in millions) Net sales $9,610 Less: Cost of goods sold 6,310 Less: Depreciation 1.370 Earnings before interest and taxes 1,930 Less: Interest paid 630 Taxable income 1,300 Less: Taxes 455 Net income $845 Nabors, Inc. 2018 and 2019 Balance Sheets ($ in millions) 2018 2019 2018 2019 Cash. $310 $405 Accounts payable $2,720 $2,570 Accounts rec. 2,640 3,055 Notes payable. 100 0 Inventory 3,275 3,850 Long-term debt 7,875 8,100 Net fixed assets 10,960 10,670 Common stock 5,000 5,250 Retained earnings 1,490 2.060 Total assets $17,185 $17,980 Total liab.& equity $17,185 $17,980

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