Consider the following simplified financial statements for the Fire Corporation (assuming no income taxes): Income Statement

Sales

$39,914

Costs

$20,393

Balance Sheet

Assets

$54,772

Debt

$33,939

Equity

?

The company has predicted a sales increase of 15 percent. It has predicted that every item on the balance sheet will increase by 15 percent as well.

How much dividends should be paid to reconcile the pro forma balance sheet?

x=-14y=174

y=3x+5,y=-x+4

3x+5=-x+4

There are infinite number of solutions!

Move all terms containing

x

x to the left side of the equation.

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4

x

+

5

=

4

4x+5=4

y

=

−

x

+

4

y=-x+4

Move all terms not containing

x

x to the right side of the equation.

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4

x

=

−

1

4x=-1

y

=

−

x

+

4

y=-x+4

Divide each term by

4

4 and simplify.

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x

=

−

1

4

x=-14

y

=

−

x

+

4

y=-x+4

Replace all occurrences of

x

x with the solution found by solving the last equation for

x

x. In this case, the value substituted is

−

1

4

-14.

x

=

−

1

4

x=-14

y

=

−

(

−

1

4

)

+

4

y=-(-14)+4

Simplify the right side.

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x

=

−

1

4

x=-14

y

=

17

4

y=174

The solution can be shown in both point and equation forms.

Point Form:

(

−

1

4

,

17

4

)

(-14,174)

Equation Form:

x

=

−

1

4

y

=

17

4

x=-14y=174