Farnsbeck Inc. is forecasting a 15% increase in sales next year. Assume the company is operating at 100%capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of its NetIncome in dividends and move 40% into retained earningsBased on the Income statement and balance sheet below answer the following questions.ASSETS20202019ASSETS20202019CASH AND MARKETABLE SECURITIESACCOUNTS RECEIVABLEINVENTORIES29,00025,000116,000 100,000145,000 125,000290,000 250,000362,000 350,000CURRENT ASSETSGROSS PLANT AND EQUIPMENTLESS: ACCUMULATED DEPRECIATION130,000 100,000232,000 250,000NET FIXED ASSETSTOTAL ASSETS 522,000 500,000LIABILITIES AND EQUITY90,48034,80025,420CURRENT LAIBILITIES 150,700 142,000145,000 140,000TOTAL LIABILITIES 295,700 282,000150,000 150,00078,000ACCOUNTS PAYABLEACCRURALSNOTES PAYABLE30,00034,000LONG TERM DEBTCOMMON STOCK ($1.00 par)RETAINED EARNINGS76,30068,000TOTAL OWNER'S EQUITY 226,300 218,000TOTAL LIABILITIES AND EQUITY 522,000 500,000INCOME STATEMENT20202019NET REVENUES & SALES (100,000 UNITS)COST OF GOODS SOLDGROSS PROFITFIXED OPERATING EXPENSES (pre depreciation)EBITDA Earnings before Intrest, Taxes, Dep & AmoritDEPRECIATION EXPENSEOPERATING INCOME (EBIT)INTERESTINCOME BEFORE TAXES (EBT)INCOME TAXES (40%)NET INCOME812,000 700,000522,000 450,000290,000 250,000174,200 151,000115,800 | 99,00030,000 25,00085,80014,50074,00014,00071,30060,00028,52024,00042,78034,480Retained Earnings 8,30036,00028,5007,50050,000divNUMBER OF SHARES OUTSTANDING50.000Compute the new level of net income for the company. [Select]Compute the company's addition to retained earnings for the [ Select]year.Compute the new level of total assets required. ( Select]Calculate the new level of current liabilities (Select]Compute the company's new level of retained earnings on the balance sheet ISelect]Calculate the level of Additional Funds Needed (AFN) to support the increase in sales.(Select]

Income statement is among the three financial statement named as cash flow statement and balance.…

capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of Income in dividends and move 40% into retained earnings Based on the Income statement and balance sheet below answer the following questions ASSETS 2020 21 ASSETS 2020 2019 CASH AND MARKETABLE SECURITIES 29,000 25,000 ACCOUNTS RECEIVABLE INVENTORIES 116,000 100,000 145,000 125,000 290,000 250,000 CURRENT ASSETS

capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of Income in dividends and move 40% into retained earnings Based on the Income statement and balance sheet below answer the following questions ASSETS 2020 21 ASSETS 2020 2019 CASH AND MARKETABLE SECURITIES 29,000 25,000 ACCOUNTS RECEIVABLE INVENTORIES 116,000 100,000 145,000 125,000 290,000 250,000 CURRENT ASSETS

Cornerstones of Financial Accounting

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ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 88PSA: Ratio Analysis Consider the following information taken from the stockholders equity section: How do...

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Question

Farnsbeck Inc. is forecasting a 15% increase in sales next year. Assume the company is operating at 100%
capacity. The company has 50,000 shares of common stock outstanding. The firm will pay out 60% of its Net
Income in dividends and move 40% into retained earnings
Based on the Income statement and balance sheet below answer the following questions.
ASSETS
2020
2019
ASSETS
2020
2019
CASH AND MARKETABLE SECURITIES
ACCOUNTS RECEIVABLE
INVENTORIES
29,000
25,000
116,000 100,000
145,000 125,000
290,000 250,000
362,000 350,000
CURRENT ASSETS
GROSS PLANT AND EQUIPMENT
LESS: ACCUMULATED DEPRECIATION
130,000 100,000
232,000 250,000
NET FIXED ASSETS
TOTAL ASSETS 522,000 500,000
LIABILITIES AND EQUITY
90,480
34,800
25,420
CURRENT LAIBILITIES 150,700 142,000
145,000 140,000
TOTAL LIABILITIES 295,700 282,000
150,000 150,000
78,000
ACCOUNTS PAYABLE
ACCRURALS
NOTES PAYABLE
30,000
34,000
LONG TERM DEBT
COMMON STOCK ($1.00 par)
RETAINED EARNINGS
76,300
68,000
TOTAL OWNER'S EQUITY 226,300 218,000
TOTAL LIABILITIES AND EQUITY 522,000 500,000
INCOME STATEMENT
2020
2019
NET REVENUES & SALES (100,000 UNITS)
COST OF GOODS SOLD
GROSS PROFIT
FIXED OPERATING EXPENSES (pre depreciation)
EBITDA Earnings before Intrest, Taxes, Dep & Amorit
DEPRECIATION EXPENSE
OPERATING INCOME (EBIT)
INTEREST
INCOME BEFORE TAXES (EBT)
INCOME TAXES (40%)
NET INCOME
812,000 700,000
522,000 450,000
290,000 250,000
174,200 151,000
115,800 | 99,000
30,000 25,000
85,800
14,500
74,000
14,000
71,300
60,000
28,520
24,000
42,780
34,480
Retained Earnings 8,300
36,000
28,500
7,500
50,000
div
NUMBER OF SHARES OUTSTANDING
50.000
Compute the new level of net income for the company. [Select]
Compute the company's addition to retained earnings for the [ Select]
year.
Compute the new level of total assets required. ( Select]
Calculate the new level of current liabilities (Select]
Compute the company's new level of retained earnings on the balance sheet ISelect]
Calculate the level of Additional Funds Needed (AFN) to support the increase in sales.
(Select]

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The company expected to pay dividend of $4 at end of the coming year (December 2022). The historical growth pattern for dividends is as follows: Year Dividend per share ($) 2021 3.75 2020 3.50 2019 3.30 2018 3.15 2017 2.85 Compute the price of common stock for 31 December 2021, given that required rate of return is 16.22 percent.
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