Consider the following simplified financial statements for the Wims Corporation (assuming no income taxes):

Consider the following simplified financial statements for the Wims Corporation (assuming no income taxes):

 

Income Statement				Balance Sheet
Sales	$	39,600		Assets	$	23,800		Debt	$	6,800
Costs		31,800						Equity		17,000
Net income	$	7,800		Total	$	23,800		Total	$	23,800

 

The company has predicted a sales increase of 20 percent. Assume the company pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.

 

Prepare the pro forma statements. (Input all amounts as positive values. Do not round intermediate calculations and round your answers to the nearest whole dollar amount.)

What is the external financing needed?
 

Note: Intermediate answers are shown below as rounded, but the full answer was used to complete the calculation.

Dividends = $4,680

Addition to retained earnings = $4,680

 

Note that the balance sheet does not balance. This is due to EFN. The EFN for this company is:

 

EFN = Total assets – Total liabilities and equity

EFN = $28,560 – 28,480

EFN = $80