Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of

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Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed assets. The company forecasts that the ratio of revenues to total assets at the start of each year will remain at 1.75. Fixed costs are expected to remain at $53, and variable costs at 80% of revenue. The company's policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20%.
a. Construct a model for Executive Cheese like the one in Tables 29.9 to 29.11.
b. Use your model to produce a set of financial statements for 2017.
Table 29.19 shows the 2016 financial statements for the Executive
Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Principles of Corporate Finance

ISBN: 978-1259144387

12th edition

Authors: Richard Brealey, Stewart Myers, Franklin Allen

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