a$)$The main difference between this model and the percentage of ales approach is that we have aparated out

depreciation and interent. Depreciation is calculated as a percentage of beginning fixed asuts, and the amount

of interest depends on the amount of debt. However, aince depreciation and interest now do not nectasarily

vary directly with sales, the profit margin is no longer constant.

The model parameters can be based on a percentage of sales model, or they can be determined by other

The parameter entimates wad in this calculation of proform financial utatements are:

Cost percentage $=$ Costa $ales

Depreciation rate $=$ Depreciation $\frac{?}{?}$ Beginning fixed asuts

Intereat rate $=$ Interest paid $\frac{?}{?}$ Total debt

Effective tax rate $=$ Taxea $\frac{?}{?}$ Trable income

Payout ratio $=$ Dividend $\frac{?}{\text{N}\text{e}\text{t}}$ income

Capital intensity ratio $=$ Fixed assets $\frac{?}{?}$ Sales

The Lotwa Company is preparing its pro forma financial atatemunts for the next year waing this modal. The

Note: Butinning Fixad Asats $=$

$$1,125,000$

$(40$ Points$)$ Calculate the nesessary ratios and parametern needed for financial planning in preparation for

b$.(40$ Yoints$)$ Construct the protorma trnancial statements $($L$.$e$.,$ encome statement and balance ahent$)$ vutes

Lotus Company $-$ Proforma Analysis Spreadsheet

a$.(40$ Points$)$ Calculate the following ratios and parameters needed for financial planning:

Cost percentage

Depreciation percentage

Interest rate

Tax rate

Payout ratio

Fixed assets$/$Total assets

Profit Margin $($Initial$)$

Capital intensity ratio

b$.$

$(40$ Points$)$ Construct the proforma financial statements $($i$.$e$.,$ income statement and balance sheet$)$ using the parameters you

calculated. Your proforma balance sheet should balance.$(40$ Points$)$ Calculate the following ratios and parameters needed for financial planning:Cost percentage

Depreciation percentage

Interest rate

Tax rate

Payout ratio

Fixed assets$/$Total assets

Profit Margin $($Initial$)$

Capital intensity ratio

b$)(40$ Points$)$ Construct the proforma financial statements $($i$.$e$.,$ income statement and balance sheet$)$ using the parameters you calculated. Your proforma balance sheet should balance.