Most assets can be increase as a percentage of sales. For instance, cash can be increased by any amount. However, fixed asset often must be increased in specific amounts since it is impossible, as a practical matter, to buy part of new plant or machine. In this case, a company has a “staircase” or “lumpy” fixed cost structure. Assume that East Coast Yachts is currently producing at 100 percent of capacity and sale are expected to grow at 20 percent. As a result, to expand production, the company must be 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 assumption? What does is imply about capacity utilization for East Coast Yachts next year?