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The balance sheet of Elgin Corporation as on 31st December 20X0 is shown below:
Sales for 20X0 were 160, while net profit after taxes was 10. Elgin paid dividend of 5 to equity shareholders.
(a) If sales increase by 50 percent (80) during 20X1, what will be Elgin's external funds requirement? Assume that profit margin ratio and dividend payout ratio would remain unchanged.
(b) Prepare Elgin's projected balance sheet as on 31stDecember 20X1. Assume thatthe external fund requirement will be raised equally from term loans and fresh issue on equity capital.
(c) Calculate the following ratios for 20X0 and 20X1: current ratio, debt to total assets ratio, and return on equity
(d) Assume, now, that the sales growth of 80 occurs evenly over a period of 4 years (20 per year) rather than in just one year, (i) Calculate the total external fund requirement over the four-year period, (ii) Construct a pro forma balance sheet as on December 31, 20X4.