These are your financial statements for the year ending today: BALANCE SHEET Accounts Payable Accruals Notes...
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These are your financial statements for the year ending today: BALANCE SHEET Accounts Payable Accruals Notes Payable Total Current Liabilities Cash Receivables Inventories Total Current Assets Net Fixed Assets Total Assets ● ● $ 340,000 4,200,000 4,960,000 $9,500,000 2,500,000 ● $12,000,000 Long-term Debt Common Stock Retained Earnings Total Liabilities and Equity INCOME STATEMENT Sales Less: Operating Costs EBIT Less: Interest EBT Less: Taxes (40%) Net Income Less: Dividends Additions to Retained Earnings $ 2,720,000 980,000 1,300,000 $ 5,000,000 2,000,000 3,800,000 1,200,000 $12,000,000 ● You expect sales to increase 40% next year. • Assume you are currently operating at 75% capacity . Interest expense next year will be 15% of any interest-bearing debt balance at the beginning of the year Dividends will increase by 50% next year Operating costs are 60% fixed and 40% variable Days Sales Outstanding are expected to decrease by 5 days next year Days Payables Outstanding are expected to decrease by 4 days next year Cash will vary with sales • Using a pro forma income statement to estimate the additions to retained earnings, how much external funds do you project needing to support the 40% sales growth? If the additional funds were raised using long-term debt, immediately, how would that affect your additional funds estimate? Project your income statement and balance sheet under both scenarios: first estimate and second estimate. $36,500,000 29,200,000 $ 7,300,000 500,000 $ 6,800,000 2,720,000 $ 4,080,000 3,500,000 $ 580,000 These are your financial statements for the year ending today: BALANCE SHEET Accounts Payable Accruals Notes Payable Total Current Liabilities Cash Receivables Inventories Total Current Assets Net Fixed Assets Total Assets ● ● $ 340,000 4,200,000 4,960,000 $9,500,000 2,500,000 ● $12,000,000 Long-term Debt Common Stock Retained Earnings Total Liabilities and Equity INCOME STATEMENT Sales Less: Operating Costs EBIT Less: Interest EBT Less: Taxes (40%) Net Income Less: Dividends Additions to Retained Earnings $ 2,720,000 980,000 1,300,000 $ 5,000,000 2,000,000 3,800,000 1,200,000 $12,000,000 ● You expect sales to increase 40% next year. • Assume you are currently operating at 75% capacity . Interest expense next year will be 15% of any interest-bearing debt balance at the beginning of the year Dividends will increase by 50% next year Operating costs are 60% fixed and 40% variable Days Sales Outstanding are expected to decrease by 5 days next year Days Payables Outstanding are expected to decrease by 4 days next year Cash will vary with sales • Using a pro forma income statement to estimate the additions to retained earnings, how much external funds do you project needing to support the 40% sales growth? If the additional funds were raised using long-term debt, immediately, how would that affect your additional funds estimate? Project your income statement and balance sheet under both scenarios: first estimate and second estimate. $36,500,000 29,200,000 $ 7,300,000 500,000 $ 6,800,000 2,720,000 $ 4,080,000 3,500,000 $ 580,000
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Answer Particulars Current year projected year Calculations working Sales 36500000 51100000 36500000... View the full answer
Related Book For
Fundamentals of corporate finance
ISBN: 978-0470876442
2nd Edition
Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates
Posted Date:
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