If projected sales growth is actually 14.70%, Calculate the EFN. (Refer to Exhibits 19.10 and 19.11.) (Round answer to 2 decimal places, e.g. 0.45. Enter negative amount using either a negative sign preceding the number e.g. -0.45 or parentheses e.g. (0.45).) Exhibit 19.10 Empire Enterprises: Pro Forma Income Statement and Balance Sheet (S millions) Income Statement Net sales $ 120.0 Costs 108.0 Net income $ 12.0 Dividends $ 7.2 Additions to retained earnings $ 4.8 Balance Sheet Assets Liabilities and Stockholders' Equity Change Change Assets $ 60.0 S 10.0 Total debt $ 20.0 $0.0 Equity Total liabilities and stockholder's equity 34.8 4.8 Total assets $60.0 $ 10.0 $ 54.8 $ 4.8 External financing needed (EFN) $ 5.2 $ 5.2
If projected sales growth is actually 14.70%, Calculate the EFN. (Refer to Exhibits 19.10 and 19.11.) (Round answer to 2 decimal places, e.g. 0.45. Enter negative amount using either a negative sign preceding the number e.g. -0.45 or parentheses e.g. (0.45).) Exhibit 19.10 Empire Enterprises: Pro Forma Income Statement and Balance Sheet (S millions) Income Statement Net sales $ 120.0 Costs 108.0 Net income $ 12.0 Dividends $ 7.2 Additions to retained earnings $ 4.8 Balance Sheet Assets Liabilities and Stockholders' Equity Change Change Assets $ 60.0 S 10.0 Total debt $ 20.0 $0.0 Equity Total liabilities and stockholder's equity 34.8 4.8 Total assets $60.0 $ 10.0 $ 54.8 $ 4.8 External financing needed (EFN) $ 5.2 $ 5.2
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
![Exhibit 19.11
EFN = (Growth rate x Initial assets) - Addition to retained earnings
External Funding
Needed (EFN) and
Growth for Empire
Enterprises
The exhibit graphically
illustrates Equation 19.6,
showing the connection
between growth rate in
sales and EFN. The
horizontal axis plots the
firm's projected growth
rate, and the vertical axis
plots EFN. The upward
slope of the line illustrates
how external financing
increases with the growth
rate, assuming that the
dividend policy is held
At some growth rate
(9.6% for Empire
Enterprises). EFN - 0.
A positive EFN
means that the firm
must find external
funding to finance
its growth.
$5.2
9.6%
20%
Projected Growth Rate
-$4.8-
At low growth rates, EFN is
negative (EFN < 0), and the
firm has surplus funds.
constant.
The EFN is $
millions.
External Funding Needed (S)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F97446883-4bce-4341-a190-6d1ce3035d7f%2F73642a11-15c2-4c56-b52b-98b097ce8680%2F0ok4hqr_processed.png&w=3840&q=75)
Transcribed Image Text:Exhibit 19.11
EFN = (Growth rate x Initial assets) - Addition to retained earnings
External Funding
Needed (EFN) and
Growth for Empire
Enterprises
The exhibit graphically
illustrates Equation 19.6,
showing the connection
between growth rate in
sales and EFN. The
horizontal axis plots the
firm's projected growth
rate, and the vertical axis
plots EFN. The upward
slope of the line illustrates
how external financing
increases with the growth
rate, assuming that the
dividend policy is held
At some growth rate
(9.6% for Empire
Enterprises). EFN - 0.
A positive EFN
means that the firm
must find external
funding to finance
its growth.
$5.2
9.6%
20%
Projected Growth Rate
-$4.8-
At low growth rates, EFN is
negative (EFN < 0), and the
firm has surplus funds.
constant.
The EFN is $
millions.
External Funding Needed (S)
![Problem 19.17
If projected sales growth is actually 14.70%, Calculate the EFN. (Refer to Exhibits 19.10 and 19.11.) (Round answer to 2 decimal places, e.g. 0.45. Enter negative amount
using either a negative sign preceding the number e.g. -0.45 or parentheses e.g. (0.45).)
Exhibit 19.10 Empire Enterprises: Pro Forma Income Statement and Balance Sheet ($ millions)
Income Statement
Net sales
$ 120.0
Costs
108.0
Net income
$ 12.0
Dividends
$
$ 7.2
Additions to retained earnings
4.8
Balance Sheet
Assets
Liabilities and Stockholders' Equity
Change
Change
Assets
$ 60.0
S 10.0
Total debt
$ 20.0
$0.0
Equity
Total liabilities and stockholder's equity
34.8
4.8
$ 10.0
$ 54.8
$ 5.2
Total assets
$ 60.0
$ 4.8
External financing needed (EFN)
$ 5.2
The pro forma balance sheet for Empire Enterprises does not balance, and the difference is the amount of EFN. Because
the company's board does not wish to issue common stock, the funding will have to take the form of long-term debt.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F97446883-4bce-4341-a190-6d1ce3035d7f%2F73642a11-15c2-4c56-b52b-98b097ce8680%2Fk3l0nz4_processed.png&w=3840&q=75)
Transcribed Image Text:Problem 19.17
If projected sales growth is actually 14.70%, Calculate the EFN. (Refer to Exhibits 19.10 and 19.11.) (Round answer to 2 decimal places, e.g. 0.45. Enter negative amount
using either a negative sign preceding the number e.g. -0.45 or parentheses e.g. (0.45).)
Exhibit 19.10 Empire Enterprises: Pro Forma Income Statement and Balance Sheet ($ millions)
Income Statement
Net sales
$ 120.0
Costs
108.0
Net income
$ 12.0
Dividends
$
$ 7.2
Additions to retained earnings
4.8
Balance Sheet
Assets
Liabilities and Stockholders' Equity
Change
Change
Assets
$ 60.0
S 10.0
Total debt
$ 20.0
$0.0
Equity
Total liabilities and stockholder's equity
34.8
4.8
$ 10.0
$ 54.8
$ 5.2
Total assets
$ 60.0
$ 4.8
External financing needed (EFN)
$ 5.2
The pro forma balance sheet for Empire Enterprises does not balance, and the difference is the amount of EFN. Because
the company's board does not wish to issue common stock, the funding will have to take the form of long-term debt.
Expert Solution
![](/static/compass_v2/shared-icons/check-mark.png)
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
![Blurred answer](/static/compass_v2/solution-images/blurred-answer.jpg)
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Essentials Of Investments](https://compass-isbn-assets.s3.amazonaws.com/isbn_cover_images/9781260013924/9781260013924_smallCoverImage.jpg)
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
![FUNDAMENTALS OF CORPORATE FINANCE](https://www.bartleby.com/isbn_cover_images/9781260013962/9781260013962_smallCoverImage.gif)
![Financial Management: Theory & Practice](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Foundations Of Finance](https://www.bartleby.com/isbn_cover_images/9780134897264/9780134897264_smallCoverImage.gif)
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
![Fundamentals of Financial Management (MindTap Cou…](https://www.bartleby.com/isbn_cover_images/9781337395250/9781337395250_smallCoverImage.gif)
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
![Corporate Finance (The Mcgraw-hill/Irwin Series i…](https://www.bartleby.com/isbn_cover_images/9780077861759/9780077861759_smallCoverImage.gif)
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education