Problem Five (20 marks)

Please solve using excel, this is all the information given

Financial information on AAA Ltd. is shown below.

AAA Ltd. Income Statement
For the Year Ended December 31st,
	2019	2018
Sales	4,215,750	3,850,000
Cost Of Goods Sold	2,178,700	2,016,320
Other Expenses	1,005,200	986,500
Depreciation	9,800	8,550
Earnings Before Interest and Taxes	1,022,050	838,630
Interest Expense	56,735	46,870
Earnings Before Taxes	965,315	791,760
Taxes (30%)	289,595	237,528
Net Income	$ 675,721	$ 554,232

AAA Ltd. Balance Sheet
As at December 31st,
ASSETS	2019	2018
Cash & Equivalent	50,750	23,180
Short-term investments	202,834	186,014
Inventories	1,458,841	1,355,047
Accounts Receivable	218,500	131,221
Total Current Assets	1,930,925	1,695,462
Prop, Plant & Equip - Net	2,154,301	1,940,594
Total Assets	$ 4,085,226	$ 3,636,056
LIABILITIES & EQUITY
Accounts Payable	267,566	258,151
Notes Payable	82,823	62,310
Accruals	58,559	31,210
Short-term Debt	314,469	317,416
Total Current Liabilities	723,417	669,087
Long-Term Debt	833,547	844,139
Total Liabilities	1,556,964	1,513,226
Common Share Capital	650,000	650,000
Retained Earnings	1,878,263	1,472,830
Total Equity	2,528,263	2,122,830
Total Liabilities and Equity	$ 4,085,226	$ 3,636,056

Answer the following questions (a-e). [Please note: short-term investments are non-operating current assets; notes payable and short-term debt are non-operating current liabilities.]

1. What is Operating Cash Flow for 2019?

2. What is Free Cash Flow for 2019?

3. The stock is traded at $30 per share at the end of 2019 and there are 100,000 shares outstanding. What is MVA during 2019?

4. Given the firms WACC is 10%, what is EVA during 2019?

In addition to the AAA Ltd. financial statements, you are given more information as follows:

Sales are forecast to increase by 10% in 2020.

Notes Payable, short-term Debt, Long-term Debt, and Common Share Capital will not change. Net Plant and Equipment is forecasted to be $2,500,000 next year. Short-term investments are expected to be $250,000.

In 2020, the companys dividend payout ratio will be 40%.

In 2020, cost of goods sold is expected to be 50% of sales. Other expenses will be 25% of sales. Depreciation expense in 2020 is expected to be $11,000.

Cash is expected to be 1% of sales, and inventories will be 40% of sales. Accounts receivable will be 4% of sales. Accounts payable will be 4% of sales. Accruals will be 1% of sales.

The company is expected to pay 6% per year compounded annually on its short-term debt and 8% per year compounded annually on its long-term debt. The interest expense on the short-term debt in 2020 is calculated as interest rate on short-term debt * amount of short-term debt outstanding at the end of 2019. The interest expense on the long-term debt is calculated as interest rate on long-term debt * amount of long-term debt outstanding at the end of 2019.

The companys tax rate is 30%.

Based on the information provided you are to:

5. Complete the pro-forma income statement and balance sheet for 2020.

6. Calculate the amount of Additional Funds Needed in 2020.