Chapter 3 Problem 13
13.	Below are the 2014 financial statements for Aquatic Supplies Co. Also appearing are managements forecasts for how individual financial statement items will vary in the
	future. The company expects sales to grow 12% next year. Aquatic Supplies finances all of its needs with 10-year long-term debt at 10% interest, while excess cash at the end
	of the year is added to the cash balance.
a.	Prepare a spreadsheet to estimate Aquatic Supplies 's 2015 need for external funding assuming long-term debt and interest expense remain at their 2014 levels.
b.	Modify your spreadsheet forecast in part (a) to capture the interdependence between the loan and interest expense. That is, switch your spreadsheet to "manual calculation"
	and include the necessary loan and added interest expense in your forecast.
d.	Perform a sensitivity analysis of Aquatic Supplies Co.s external financing needs as determined in part (b). Assume sales grow at 17% instead of 12%. How much does the
	bank loan increase as sales go from 12% to 17%?
e.	Perform a scenario analysis on the companys projection as determined in part (b). Assume sales grow 20%, the cost of goods sold is 38% of sales, inventory falls from 5%
	of sales to 3%, and accounts receivable fall from 13% of sales to 10%. What happens to the loan need in this scenario relative to your answer in part (b)?
	Aquatic Supplies Co.
	Income Statement (in $ millions)
		2014	Assumptions
	Sales	$ 582.762	12%	growth in sales
	Cost of Goods Sold	240.828	39%	percentage of sales
	Gross Profit	341.934
	Selling, General, & Administrative Exp.	257.507	49%	percentage of sales
	Operating Income Before Deprec.	84.427
	Depreciation,Depletion,&Amortization	25.221	30%	percentage of net PP&E
	Operating Profit	59.206
	Interest Expense	16.430	initially constant
	Pretax Income	42.776
	Total Income Taxes	14.971	35%	percentage of earnings before taxes
	Net income	$ 27.805
	Balance Sheet (in $ millions)
	ASSETS
	Cash & Equivalents	$ 7.152	2%	minimum cash balance as % of sales
	Account Receivable	70.538	13%	percentage of sales
	Inventories	39.033	5%	percentage of sales
	Prepaid Expenses	9.339	no change
	Other Current Assets	27.076	6%	percentage of sales
	Total Current Assets	153.138
	Net Plant, Property & Equipment	81.648	15%	percentage of sales
	Intangibles	9.415	no change
	Other Assets	24.642	5%	percentage of sales
	TOTAL ASSETS	$ 268.843
	LIABILITIES
	Accounts Payable	$ 36.951	6%	percentage of sales
	Accrued Expenses	31.206	5%	percentage of sales
	Other Current Liabilities	3.663	no change
	Total Current Liabilities	71.820
	Long Term Debt	157.720	initially constant
	Accrued wages	21.418	3%	percentage of sales
	Total Liabilities	250.958
	EQUITY
	Common Stock	1.702	no change
	Capital Surplus	55.513	no change
	Retained Earnings	118.729	no dividends paid so all income is retained
	Less: Treasury Stock	158.059	no change
	TOTAL EQUITY	17.885
	TOTAL LIABILITIES & EQUITY	$ 268.843