PowerApp Corporation, a high-performance battery manufacturer, experienced strong growth in 2019 and is anticipating revenue growth...

 
 

Transcribed Image Text:

PowerApp Corporation, a high-performance battery manufacturer, experienced strong growth in 2019 and is anticipating revenue growth in 2020 of 17%. Here is the 2019 financial picture: Memo: Growth rate for Next Year 17% Income Statement Sales $ 62,807,000 Costs 60,180,000 Taxable income $ 2,627,000 Taxes 551,670 21% Net income $ 2,075,330 Memo: Dividends 1,405,500 Addition to retained earnings 669,830 Balance Sheet Assets Liabilities & Equity Current assets $ Fixed assets 7,200,000 15,300,000 Short-term debt Long-term debt Common stock Total assets Accumulated retained earnings Total equity External Funding Needed $ 22,500,000 Total L&E $ 1,800,000 4,300,000 $ 1,300,000 15,100,000 $ 16,400,000 $ $ 22,500,000 A. Develop an Income Statement for 2020. Assume that Pre-Tax Income Margin % remains the same as in 2019 B. Create a 2020 Balance Sheet with the following constraints: Assets-to-Sales ratio is same as 2019; Long-Term, Short-Term Debt, and dividends are unchanged at current dollar amounts. What is the amount of external funding required to support the 2020 operations? C. Management has just made an initial estimate that their plant (net Fixed Assets) has the capacity to support up to $75 million in sales without additions from the 2019 level. What is the new external funding required in 2020 now? D. On further review, management finally determines that plant additions of $1.2 million are required if Revenue equals or exceeds $65 million; and more additions are required for every increment of $4 million in Revenue over $65 million. (This means that no new Fixed Assets are needed for Revenue below $65 million; $1.2 million in additions are needed for Revenue of $65 million to $69 million: $2.4 million for $69 to $73 million in Revenue; and so on.) They have also decided to suspend (not pay) the dividend in 2020. All the other assumptions remain as in Part B above. What is the 2020 external financing need now? PowerApp Corporation, a high-performance battery manufacturer, experienced strong growth in 2019 and is anticipating revenue growth in 2020 of 17%. Here is the 2019 financial picture: Memo: Growth rate for Next Year 17% Income Statement Sales $ 62,807,000 Costs 60,180,000 Taxable income $ 2,627,000 Taxes 551,670 21% Net income $ 2,075,330 Memo: Dividends 1,405,500 Addition to retained earnings 669,830 Balance Sheet Assets Liabilities & Equity Current assets $ Fixed assets 7,200,000 15,300,000 Short-term debt Long-term debt Common stock Total assets Accumulated retained earnings Total equity External Funding Needed $ 22,500,000 Total L&E $ 1,800,000 4,300,000 $ 1,300,000 15,100,000 $ 16,400,000 $ $ 22,500,000 A. Develop an Income Statement for 2020. Assume that Pre-Tax Income Margin % remains the same as in 2019 B. Create a 2020 Balance Sheet with the following constraints: Assets-to-Sales ratio is same as 2019; Long-Term, Short-Term Debt, and dividends are unchanged at current dollar amounts. What is the amount of external funding required to support the 2020 operations? C. Management has just made an initial estimate that their plant (net Fixed Assets) has the capacity to support up to $75 million in sales without additions from the 2019 level. What is the new external funding required in 2020 now? D. On further review, management finally determines that plant additions of $1.2 million are required if Revenue equals or exceeds $65 million; and more additions are required for every increment of $4 million in Revenue over $65 million. (This means that no new Fixed Assets are needed for Revenue below $65 million; $1.2 million in additions are needed for Revenue of $65 million to $69 million: $2.4 million for $69 to $73 million in Revenue; and so on.) They have also decided to suspend (not pay) the dividend in 2020. All the other assumptions remain as in Part B above. What is the 2020 external financing need now?