The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.   CROSBY, INCORPORATED 2020 Income Statement Sales   $ 755,000 Costs   611,000 Other expenses   25,000       Earnings before interest and taxes   $ 119,000 Interest paid   10,800       Taxable income   $ 108,200 Taxes (22%)   23,804       Net income   $ 84,396       Dividends $ 31,840   Addition to retained earnings 52,556     CROSBY, INCORPORATED Balance Sheet as of December 31, 2020 Assets   Liabilities and Owners’ Equity   Current assets   Current liabilities   Cash $ 24,440 Accounts payable $ 58,200 Accounts receivable 33,780 Notes payable 15,200         Inventory 70,700 Total $ 73,400         Total $ 128,920 Long-term debt $ 103,000             Owners’ equity   Fixed assets   Common stock and paid-in surplus $ 102,000 Net plant and equipment $ 212,000 Retained earnings 62,520             Total $ 164,520         Total assets $ 340,920 Total liabilities and owners’ equity $ 340,920           What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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The most recent financial statements for Crosby, Incorporated, follow. Sales for 2021 are projected to grow by 25 percent. Interest expense will remain constant; the tax rate and the dividend payout rate will also remain constant. Costs, other expenses, current assets, fixed assets, and accounts payable increase spontaneously with sales.

 

CROSBY, INCORPORATED
2020 Income Statement
Sales   $ 755,000
Costs   611,000
Other expenses   25,000
     
Earnings before interest and taxes   $ 119,000
Interest paid   10,800
     
Taxable income   $ 108,200
Taxes (22%)   23,804
     
Net income   $ 84,396
     
Dividends $ 31,840  
Addition to retained earnings 52,556  

 

CROSBY, INCORPORATED
Balance Sheet as of December 31, 2020
Assets   Liabilities and Owners’ Equity  
Current assets   Current liabilities  
Cash $ 24,440 Accounts payable $ 58,200
Accounts receivable 33,780 Notes payable 15,200
       
Inventory 70,700 Total $ 73,400
       
Total $ 128,920 Long-term debt $ 103,000
       
    Owners’ equity  
Fixed assets   Common stock and paid-in surplus $ 102,000
Net plant and equipment $ 212,000 Retained earnings 62,520
       
    Total $ 164,520
       
Total assets $ 340,920 Total liabilities and owners’ equity $ 340,920
       

 

What is the EFN if the firm wishes to keep its debt-equity ratio constant? (Do not round intermediate calculations and round your answer to the nearest whole number, e.g., 32.)

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