a. Use the Dynamic Mattress model (Tables 29.8 - 29.10) and the spreadsheets on the book's website at www.mhhe.com/bma to produce pro forma income statements, balance sheets, and statements of cash flows for 2013 and 2014. Assume business as usual except that now sales and costs are planned to expand by 30% per year, as are fixed assets and net working capital. The interest rate is forecasted to remain at 10% and stock issues are ruled out. Dynamic also sticks to its 60% dividend payout ratio.
b. What are the firm's debt ratio and interest coverage under this plan?
c. Can the company continue to finance expansion by borrowing?
TABLE 29.8

TABLE 29.9

TABLE 29.10

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2013 2014 2012 2200.0 2640.0 205502428. 2015 3168.0 3801 4561.9 2016 2017 5474.3 8 2914.634975 4197.0 50364 Costs (92% of revenues) Depreciation (9% of net fixed assets at start of year) EBIT (1-2 Interest (10% of Tax at 50% Net income (4-5-6) Operating cash flow (3+7) 29.7 223.7 22.5 188.7 9.0 89.8 89.8 112.4 35.6 268.5 31.8 118.3 118.3 154.0 42.8 51.3 386.6 125.0 5.0 60.0 60.0 800 debt at start of 100.1 100.1 129.8 42.0 140.1 140.1 182.9 166.2 166.2 217.5 2012 2013 2014 2015 2016 2017 Sourcas of Net income 112.4 129.8 154.0 217.5 Usas of Increase in net working capital (NWC) 50.0 100.4 58.1 69.7 83.6 1004 NWC 11% of revenues Investment in fixed assets (FA) 30.0 102.5 95.7 114.8 137.8 1654 gnet FA 12.5% of revenues 60.1 Dividend( % of net Total uses of funds (2+3 External capital required (1-5) 99.7 365.4 147.9 71.0 84.1 110.0 256.8 213.9 6 30.0 144.5 101.6 122.6 2014 2016 501.8 570.2 1072.1 2017 602.2 684.3 1286.5 2012 2013 2015 190 418.2 Net fixed assets Total net assets 440 744.5 420.0 Long-term debt Equity 90 350 440 318.5 690.6 596.8 1286.5 385.9 529.4 Total long-term labilities and equity 744.5 1072.1