Problem Solving: Answer All Questions. Show all your work (use of formula, etc,) in solving the problems. You still need to show your work even if you use the financial calculator to get the answers. Use the following financial statements information to answer #1a and #1b. SunStar, Co. 2016 Income Statement (S in millions) Net sales Less: Cost of goods sold Less: Depreciation Earnings before interest and taxes Less: Interest paid Taxable Income Less: Taxes (40%) $1,600 (640) $835 $501 Dividends Additions to Retained Eamings $ 351 150 SunStar, Co. 2015 and 2016 Balance Sheets (S in millions) 2015 2016 2015 2016 Cash s 40 S 80 Accounts payable S 240 S 255 Accounts rec. 415 450 Notes payable Total S 638 $ 670 765 779 1,045 Inventory S 1.005 S 965 Long-term debt 1438 1.875 Common stock Total Net fixed assets Retained eanings210 S2.442 Total assets $2.441 2840 Total liab& equity S2.840 1.a. (13 points) (0) find the SunStar's cash flow from assets for 2016 by finding its operating cash flows, net capital spending, change in net working capital. (ii) What are the SunStar's cash flow to creditors and cash flow to stockholders? How is the CFFA distributed? I b (15 points) SunStar expects its sales increase by 5% for 2017, Assume interest expense will remain constant; the tax rate and dividend payout rate will also remain constant. Cost of goods sold, depreciation, current assets, and accounts payable increase with sales, the firm is operating at full capacity and no new debt or equity is issued. What is its Extemal Financing Needed (EFN) for 2017? List two plug variables in this case for Sun Star. 2 (24 points) Skymoon is considering a new project. The project will require a purchase of equipment with the purchase price of $90,000. Shipping and installation cost for the equipment is $5,000. However, the project is expected to increase the net working capital balance by $2,000. The project has a 4-year life. The fixed assets will be depreciated using 5-year MACRS to a zero book value. At the end of the project, the fixed assets can be sold for $27,550. The net working capital returns to its original level at the end of the project. The project is expected to generate annual sales of 4,000 units and the selling price per unit is $25. Variable costs per unit is expected to be $15 and annual fixed costs are expected to be $5,000. The tax rate is 35 percent and the required rate of return (cost of capital) is 15 percent. Calculate the project's initial investment costs, annual operating cash flows and terminal cash flows. What are project's NPV and IRR? Should Skymoon accept the project? 4A