17-14 EXCESS CAPACITY Krogh Lumber's 2018 financial statements are shown here. Krogh Lumber: Balance Sheet as of December 31, 2018 (Thousands of Dollars) Cash $ 1,800 Accounts payable $ 7,200 Receivables 10,800 Accrued liabilities 2,520 Inventories 12,600 Notes payable 3,472 Total current assets $25,200 Total current liabilities $13,192 Mortgage bonds 5,000 Net fixed assets 21,600 Common stock 2,000 Retained earnings 26,608 $46,800 Total liabilities and equity Total assets $46,800 Krogh Lumber: Income Statement for December 31, 2018 (Thousands of Dollars) Sales $36,000 Operating costs including depreciation 30,783 Earnings before interest and taxes $ 5,217 Interest 1,017 $ 4,200 Earnings before taxes Taxes (40%) 1,680 Net income $ 2,520 Dividends (60%) $ 1,512 Addition to retained earnings $ 1,008 a. Assume that the company was operating at full capacity in 2018 with regard to all items except fixed assets; fixed assets in 2018 were being utilized to only 75% of capac- ity. By what percentage could 2019 sales increase over 2018 sales without the need for an increase in fixed assets? b. Now suppose 2019 sales increase by 25% over 2018 sales. Assume that Krogh can- not sell any fixed assets. All assets other than fixed assets will grow at the same rate as sales; however, after reviewing industry averages, the firm would like to reduce its operating costs/sales ratio to 82% and increase its total liabilities-to- assets ratio to 42%. The firm will maintain its 60% dividend payout ratio, and it currently has 1 million shares outstanding. The firm plans to raise 35% of its 2019 forecasted interest-bearing debt as notes payable, and it will issue bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short- and long-term debt) is 11%. Any stock issuances or repurchases will be made at the firm's current stock price of $40. Develop Krogh's projected financial statements like those shown in Table 17.2. What are the balances of notes payable, bonds, common stock, and retained earnings?

Alpesh

Additional information: 2018 current ratio: 1.4:1  debt to total assets: 61.1% Question: find working capital for 2018 Additional information: 2017 current ratio 1.5:1 working capital: 214,500 Question find debt to total assets for 2017

Balance Sheets   2019 2018 Assets     Cash and equivalents $100   $85   Accounts receivable 275   300   Inventories 375   250         Total current assets $750   $635   Net plant and equipment 2,300   1,490   Total assets $3,050   $2,125   Liabilities and Equity     Accounts payable $150   $85   Accruals 75   50   Notes payable 150   75         Total current liabilities $375   $210   Long-term debt 450   290         Total liabilities 825   500   Common stock 1,225   1,225   Retained earnings 1,000   400   Common equity 2,225   1,625   Total liabilities and equity $3,050   $2,125   Income Statements   2019 2018 Sales $2,065   $1,525   Operating costs excluding depreciation and amortization 1,250   1,000   EBITDA $815   $525   Depreciation and amortization 100   75   EBIT $715   $450   Interest 63   46   EBT $652   $404   Taxes (25%) 163   101   Net income $489   $303         Dividends paid $54   $48   Addition to…