Please answer on excel sheet with formulas. Below are the 2014 financial statements for Aquatic Supplies Co.Also appearing are management's 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.

Chapter 3 Problem 13 13. Below are the 2014 financial statements for Aquatic Supplies Co. Also appearing are management's forecasts for how individual f future. The company expects sales to grow 12% next year. Aquatic Supplies finances all of its needs with 10-year long-term debt 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 b. Modify your spreadsheet forecast in part (a) to capture the interdependence between the loan and interest expense. That is, switch and include the necessary loan and added interest expense in your forecast. c. Is the required loan in part (b) equal to the required loan you calculated in part (a)? Why are they different? d. Perform a sensitivity analysis of Aquatic Supplies Co.'s external financing needs as determined in part (b). Assume sales grow at bank loan increase as sales go from 12% to 17%? e. Perform a scenario analysis on the company's projection as determined in part (b). Assume sales grow 20%, the cost of goods sold 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 y f. Return now to the original assumptions and extend your projections in part (b) through 2019. Continue to assume that all external interest and any excess cash will add to the company's cash balance. What are your projected values for long-term debt and cash a g. Perform a scenario analysis on your 5-year projection in part (f). Assume growth in sales is 10%, the cost of goods sold is 41% of administrative expenses are 50% of sales. What are your projected values for long-term debt and cash balance in 2019? Aquatic Supplies Co. Income Statement (in $ millions) 2014 Sales Cost of Goods Sold Assumptions $ 582.762 240.828 12% 39% growth in sales percentage of sales Gross Profit Selling, General, & Administrative Exp. 341.934 257.507 49% percentage of sales Operating Income Before Deprec. Depreciation,Depletion,&Amortization 84.427 25.221 30% percentage of net PP&E Operating Profit Interest Expense 59.206 16.430 initially constant Pretax Income Total Income Taxes 42.776 14.971 Net income $ 35% percentage of earnings before taxes 2% 13% 5% minimum cash balance as % of sales percentage of sales percentage of sales 27.805 Balance Sheet (in $ millions) ASSETS Cash & Equivalents Account Receivable Inventories $ 7.152 70.538 39.033 Prepaid Expenses Other Current Assets Total Current Assets 9.339 27.076 153.138 no change 6% Net Plant, Property & Equipment Intangibles Other Assets 81.648 9.415 24.642 15% no change 5% percentage of sales 6% 5% no change percentage of sales percentage of sales TOTAL ASSETS LIABILITIES Accounts Payable Accrued Expenses Other Current Liabilities Total Current Liabilities Long Term Debt Accrued wages Total Liabilities EQUITY Common Stock Capital Surplus Retained Earnings Less: Treasury Stock TOTAL EQUITY TOTAL LIABILITIES & EQUITY percentage of sales percentage of sales $ 268.843 $ 36.951 31.206 3.663 71.820 157.720 21.418 250.958 1.702 55.513 118.729 158.059 17.885 $ 268.843 initially constant 3% percentage of sales no change no change no dividends paid so all income is retained no change forecasts for how individual financial statement items will vary in the with 10-year long-term debt at 10% interest, while excess cash at the end erm debt and interest expense remain at their 2011 levels. rest expense. That is, switch your spreadsheet to "manual calculation" t (b). Assume sales grow at 17% instead of 12%. How much does the w 20%, the cost of goods sold is 38% of sales, inventory falls from 5% d in this scenario relative to your answer in part (b)? ue to assume that all external funding needs will be met with debt at 10% for long-term debt and cash and equivalents in 2019? cost of goods sold is 41% of sales, and selling, general and h balance in 2019? as % of sales 10/14/2017 Chapter 3 Problem 13 Answers Sheet a. b. c. d. e. f. g. 5 10/14/2017 Calculations for parts a, b,d, and e. Aquatic Supplies Co. Income Statement (in $ millions) 2014 Sales Cost of Goods Sold 582.762 240.828 12% 39% Gross Profit Selling, General, & Administrative Exp. 341.934 257.507 49% Operating Income Before Deprec. Depreciation, Depletion, & Amortization 84.427 25.221 30% Operating Profit Interest Expense 59.206 16.430 initially constant Pretax Income Total Income Taxes 42.776 14.971 35% Net income $ Assumptions $ (a) Pro-Forma 2015 ignoring interdependencies (b) Pro-Forma 2015 including inter(d) Sensitivity (e) Scenario dependencies analysis 2015 analysis 2015 27.805 6 10/14/2017 Balance Sheet (in $ millions) ASSETS Cash & Equivalents Account Receivable Inventories Prepaid Expenses Other Current Assets Total Current Assets Net Plant, Property & Equipment Intangibles Other Assets TOTAL ASSETS LIABILITIES Accounts Payable Accrued Expenses Other Current Liabilities Total Current Liabilities $ $ $ Long Term Debt Accrued wages Total Liabilities EQUITY Common Stock Capital Surplus 2% 13% 5% no change 6% 81.648 9.415 24.642 268.843 15% no change 5% 36.951 31.206 3.663 71.820 6% 5% no change 157.720 21.418 250.958 initially constant 3% 1.702 55.513 no change no change no dividends paid so all 118.729 income is retained 158.059 no change Retained Earnings Less: Treasury Stock TOTAL EQUITY TOTAL LIABILITIES & EQUITY 7.152 70.538 39.033 9.339 27.076 153.138 17.885 $ 268.843 Need for external financing 7 Solution to part f. Aquatic Supplies Co. Income Statement (in $ millions) 2014 Sales Cost of Goods Sold 582.762 240.828 12% 39% Gross Profit Selling, General, & Administrative Exp. 341.934 257.507 49% Operating Income Before Deprec. Depreciation, Depletion, & Amortization 84.427 25.221 30% Operating Profit Interest Expense 59.206 16.430 initially constant Pretax Income Total Income Taxes 42.776 14.971 35% Net income $ Assumptions $ 27.805 2015 Pro Forma Forecasts 2015 - 2019 2016 2017 2018 2019 Balance Sheet (in $ millions) ASSETS Cash & Equivalents Account Receivable Inventories Prepaid Expenses Other Current Assets Total Current Assets Net Plant, Property & Equipment Intangibles Other Assets TOTAL ASSETS LIABILITIES Accounts Payable Accrued Expenses Other Current Liabilities Total Current Liabilities $ $ $ Long Term Debt Accrued wages Total Liabilities EQUITY Common Stock Capital Surplus 2% 13% 5% no change 6% 81.648 9.415 24.642 268.843 15% no change 5% 36.951 31.206 3.663 71.820 6% 5% no change 157.720 21.418 250.958 initially constant 3% 1.702 55.513 no change no change no dividends paid so all income is 118.729 retained 158.059 no change Retained Earnings Less: Treasury Stock TOTAL EQUITY TOTAL LIABILITIES & EQUITY 7.152 70.538 39.033 9.339 27.076 153.138 17.885 $ 268.843 Solution to part g. Aquatic Supplies Co. Income Statement (in $ millions) 2014 Assumptions $ 582.762 240.828 10% 41% Gross Profit Selling, General, & Administrative Exp. 341.934 257.507 50% Operating Income Before Deprec. Depreciation, Depletion, & Amortization 84.427 25.221 30% Operating Profit Interest Expense 59.206 16.430 initially constant Pretax Income Total Income Taxes 42.776 14.971 Sales Cost of Goods Sold Net income $ 27.805 35% 2015 Pro Forma Forecasts 2015 - 2019 2016 2017 2018 2019 Balance Sheet (in $ millions) ASSETS Cash & Equivalents Account Receivable Inventories Prepaid Expenses Other Current Assets Total Current Assets Net Plant, Property & Equipment Intangibles Other Assets TOTAL ASSETS LIABILITIES Accounts Payable Accrued Expenses Other Current Liabilities Total Current Liabilities Long Term Debt Accrued wages Total Liabilities EQUITY Common Stock Capital Surplus Retained Earnings Less: Treasury Stock TOTAL EQUITY $ 7.152 70.538 39.033 9.339 27.076 153.138 2% 13% 5% no change 6% 81.648 9.415 24.642 $ 268.843 15% no change 5% $ 6% 5% no change 36.951 31.206 3.663 71.820 157.720 initially constant 21.418 3% 250.958 1.702 55.513 no change no change no dividends paid so all income is 118.729 retained 158.059 no change 17.885 TOTAL LIABILITIES & EQUITY $ 268.843