ABC Plumbing Corp. and Income/Balance sheet . Using the various ratios and assumptions project the stock price for the case study company and new issues of stock based on the statements. Be sure to include the following: Incorporate and update the information given in Table 1 to reflect the changes for the upcoming year Prepare the income statement and balance sheet for next year based on these assumptions: (a) cash, fixed assets, payables and accruals will grow with sales; (b) the current composition of interestbearing debts, which includes short-term bank loans and long term bonds, will be maintained for next year; (c) a tax rate of 40%; (d) 10% interest rate on all interest-bearing debts; (e) 50 million common shares outstanding The current market price of ABC’s common stocks is at $23.05. If all assumptions are realized, what is your estimate for ABC’s stock a year from now based on today’s P/E ratio? If the growth rate of ABC next year is only 6%, but all other assumptions are maintained, what will ABC’s stock price be? If this growth rate turns out to be a better-than-expected rate of 12%, how much will this stock be worth a year from now based on this model?

Table 1: Selected Ratios: ABC Plumbing, INC. and Its Industry

	ABC: Current Year	Industry
Operating Costs/Sales	93.33%	88.50%
Receivables/Sales	11.67%	8.88%
Inventories/Sales	20.00%	9.12%
Liability Assets	35.00%	25.00%
Payout Ratio	28.99%	22.00%

Table 2: Income Statement & Balance Sheet

Income Statement	Current Year
Sales

Income Statement (in millions)	Current Year
Sales	$3,000.00
Operating Costs	$2,800.00
Earning before interest and tax (EBIT)	$200.00
Less interest expense	$85.00
Earning before tax	$115.00
Taxes	$46.00
Net income	$69.00
Dividends	$20.00
Addition to retained earning	$49.00
Balance Sheet (in millions)	Current Year
Asset
Cash	$50.00
Accounts receivables	$350.00
Inventories	$600.00
Fixed Assets	$1,000.00
Total Assets	$2,000.00
Liabilities and Equity
Payables + Accruals	$200.00
Short-term bank loans	$100.00
Total current liabilities	$300.00
Long-term bonds	$750.00
Total liabilities	$1,050.00
Common Stock	$150.00
Retained earnings	$800.00
Total common equity	$950.00
Total liabilities and equity	$2,000.00