Question

Noso Textile’s 2015 financial statements follow.


a. Suppose 2016 sales are projected to increase by 15 percent relative to 2015 sales. Determine Noso’s additional funds needed. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Use the projected balance sheet method to develop a pro forma balance sheet and income statement for December 31, 2016. (Do not incorporate any financing feedback effects. Use the pro forma income statement to determine the addition to retained earnings.)
b. Use the financial statements developed in part (a) to incorporate the financing feedback as a result of the addition to notes payable. (That is, do the next financial statement iteration.) For the purpose of this part, assume that the interest rate on the notes payable is 10 percent. What is the AFN for thisiteration?


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  • CreatedNovember 24, 2014
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