Aldagi Corporation is an insurance company, which operates in South Caucasus region. Since 2005, the company has increased its sales in the region and became a leader in health care, property-, and business-risk insurance. As of 2009, it started to build some hospitals and recently its subsidiary company is in charge of the management of three hospitals. Highlights of Aldagi’s financial condition from 2009 to 2015 are found in the accompanying table.

Projected Sales for 2016-2020 are as follows:

To improve its capital condition, Aldagi issued preferred stocks in 2012 and continued to increase capital in the same way until 2015. This gave Aldagi a chance to repay part of its long-term borrowings in 2014 and 2015. From 2016, the corporation will not need any additional long-term borrowings, and the entire sum needs to be repaid from 2021. So, in 2016-2020 long-term debt will be constant. Due to financial and capital conditions, Aldagi did not pay any dividends, but it is currently planning to pay a dividend of $0.5 on each share—the outstanding shares (common and preferred) at the end of 2015 total to $500,000. From 2016 we can assume that Aldagi will pay $250,000 as dividend each year. Based on the information provided:

a. Project net income for 2016–2020 using of sales method based on an average of this ration for 2009–2015.

b. Project total assets and current liabilities for 2016–2020 using the percent of sales method and your sales projections from part (a).

c. Calculate company’s discretionary financial needs for projected years.

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Sales Net income Current assets Total assets Current liabilities Long-term debt Total liabilities Preferred stock Common stock Total equity 2009 $900,000 120,000 710,000 1,660,000 460,000 800,000 1,260,000 0 400,000 400,000 2010 $1,400,000 150,000 760,000 1,830,000 560,000 850,000 1,410,000 0 420,000 420,000 2011 $1,600,000 489,000 800,000 2,250,000 840,000 850,000 1,690,000 0 560,000 560,000 2012 $2,100,000 860,000 1,000,000 2,980,000 1,100,000 900,000 2,000,000 300,000 680,000 980,000 2013 $2,500,000 1,000,000 1,500,000 3,320,000 1,200,000 1,100,000 2,300,000 320,000 700,000 1,020,000 2014 $3,100,000 1,460,000 190,000 3,325,000 1,320,000 900,000 2,220,000 325,000 780,000 1,105,000 2015 $4,000,000 1,900,000 2,100,000 3,350,000 1,400,000 800,000 2,200,000 350,000 800,000 1,150,000