Larissa approached Dan about the company’s performance and future growth plans. First, Larissa wants to find out how East Coast Yachts is performing relative to its peers. Additionally, she wants to find out the future financing necessary to fund the company’s growth. Larissa hoped that Dan would be able to estimate the amount of capital the company would have to raise next year so that East Coast Yachts would be better prepared to fund its expansion plans. ,To get Dan started with his analyses, Larissa provided the following financial statements. Dan then gathered the industry ratios for the yacht manufacturing industry.,,EAST COAST YACHTS,2010 Income Statement,,Sales $617,760,000,Cost of goods sold 435,360,000,Selling, general, & admin 73,824,000,Depreciation 20,160,000,Earnings before interest and taxes (EBIT) $ 88,416,000,Interest Expense 11,112,000,EBT $ 77,304,000,Taxes 30,921,600,Net income $46,382,400,Dividends $ 17,550,960,retained earnings $ 28,831,440,,,,,,EAST COAST YACHTS,Balance Sheet as of 2010,Assets Liabilities & Equity,,Current assets Current liabilities, Cash $ 11,232,000 Accounts payable $ 24,546,000,Accounts receivable 20,208,000 Notes payable 18,725,000,Inventory 22,656,000 Accrued Expense 6,185,000,Other 1,184,000, Total $55,280,000 Total $49,456,000,,Fixed assets $462,030,000 Long-term debt $146,560,000,Less depreciation (114,996,000),Net property,plant, equip $347,034,000,Intangible assets and others 6,840,000,Totalfixed assets $353,874,000,Total assets $409,154,000 , STOCKholders’ equity, Preferred Stock $3,000,000, Common stock $ 40,800,000, Capital Surplus $31,200,000, Retained earnings 186,138,,000, Less Treasury Stock (48,000,000), Total equity $213,138,000,Total liabilities and equity $409,154,0000,,,,,,,,,Yacht Industry Ratios, Lower Quartile Median Upper Quartile,Current ratio 0.86 1.51 1.97,Quick ratio 0.43 0.75 1.01,Total asset turnover 1.10 1.27 1.46,Inventory turnover 12.18 14.38 16.43,Receivables turnover 10.25 17.65 22.43,Debt ratio 0.32 0.47 0.61,Debt-equity ratio 0.51 0.83 1.03,Equity multiplier 1.51 1.83 2.03,Interest coverage 5.72 8.21 10.83,Profit margin 5.02% 7.48% 9.05%,Return on assets 7.05% 10.67% 14.16%,Return on equity 9.06% 14.32% 20.83%,,,6.. Most assets can be increased as a percentage of sales. For instance, cash can be increased by any amount. However, 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. In this case, a company has a "staircase" or "lumpy" fixed cost structure. Assume East Coast Yachts is currently producing at 100 percent capacity and sales are expected to grow at 20 percent. As a result, to increase production, the company must set up an entirely new line at a cost of $95,000,000 Prepare the pro forma income statement and balance sheet. What is the new EFN with these assumptions? What does this imply about capacity utilization for the company next year?,
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