4 Problem #4....35 points You are given the following information regarding ABC Corp for 2020:- RETURN ON ASSETS 6.25% NET PROFIT MARGIN 5.0% EQUITY MULTIPLIER 2.0x TOTAL ASSET TURNOVER 1.25x SALES $650,000 COST OF GOODS SOLD 50.0% TAX RATE 30.0% Assume that: 1) Expenses for 2021 will increase above 2020 levels to the extent of $50,000, plus 5% of any incremental sales over 2020 sales. 2) The projected Gross Profit for 2021, for all of 2021's sales, is expected to be consistent with 2020- 3) Additional Inventory in 2021 is anticipated, to the extent of a 2X turn on 2021's incremental sales. + 4) 2021's anticipated Dividends will be paid to the extent of 40% of all 2021's after-tax income. 5) New equipment purchases are planned in 2021 at $50,000.- 6) Assume that 2021's Assets will increase only to the extent of #3 and #5.. 2. Problem #4....continued Required: 1) What must ABC project as its 2021's sales in order to generate an additional 5% Return on Equity above last year's levels (2020's ROE + 5%, not 2020s ROE @ 105%) 2) Prepare a projected 2021 Balance Sheet (general categories are fine). 3) With consideration to the total projected 2021 sales, please calculate: 2021's projected RETURN ON EQUITY (use the DuPont model) 2021's projected RETURN ON ASSETS 2021's projected NET PROFIT MARGIN 2021's projected EQUITY MULTIPLIER 2021's projected TOTAL ASSET TURNOVER 4 Problem #4....35 points You are given the following information regarding ABC Corp for 2020:- RETURN ON ASSETS 6.25% NET PROFIT MARGIN 5.0% EQUITY MULTIPLIER 2.0x TOTAL ASSET TURNOVER 1.25x SALES $650,000 COST OF GOODS SOLD 50.0% TAX RATE 30.0% Assume that: 1) Expenses for 2021 will increase above 2020 levels to the extent of $50,000, plus 5% of any incremental sales over 2020 sales. 2) The projected Gross Profit for 2021, for all of 2021's sales, is expected to be consistent with 2020- 3) Additional Inventory in 2021 is anticipated, to the extent of a 2X turn on 2021's incremental sales. + 4) 2021's anticipated Dividends will be paid to the extent of 40% of all 2021's after-tax income. 5) New equipment purchases are planned in 2021 at $50,000.- 6) Assume that 2021's Assets will increase only to the extent of #3 and #5.. 2. Problem #4....continued Required: 1) What must ABC project as its 2021's sales in order to generate an additional 5% Return on Equity above last year's levels (2020's ROE + 5%, not 2020s ROE @ 105%) 2) Prepare a projected 2021 Balance Sheet (general categories are fine). 3) With consideration to the total projected 2021 sales, please calculate: 2021's projected RETURN ON EQUITY (use the DuPont model) 2021's projected RETURN ON ASSETS 2021's projected NET PROFIT MARGIN 2021's projected EQUITY MULTIPLIER 2021's projected TOTAL ASSET TURNOVER