Problem Two (20 MARKS) please show excel formula!

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

Sales are forecast to increase by 30% in 2022.

Short-term Debt, Long-term Debt, and Common Stock will not change. Net Plant and Equipment is forecasted to be $6,250,000 next year.

In 2022, the companys dividend payout ratio will be 80%.

Cost of goods sold is expected to be 60% of sales. Selling and Administrative Expenses will be 8% of sales. Advertising Expenses will be 4% of sales. Depreciation expense in 2022 is expected to be $185,500.

Cash is expected to be 3% of sales, accounts receivable will be 16% of sales and inventory will be 6% of sales. Accounts payable will be 7% of sales. Accrued wages payable will be 1% of sales and Income taxes payable will be 10% of the forecasted net income for 2022.

The company is expected to pay 4% 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 2022 is calculated as: [interest rate on short-term debt * amount of short-term debt outstanding at the end of 2021]. The interest expense on the long-term debt in 2022 is calculated as: [interest rate on longterm debt * amount of long-term debt outstanding at the end of 2021].

The companys tax rate is 38%.

Based on the information provided you are to:

1. Complete the pro-forma income statement and balance sheet for 2022.
2. Calculate the amount of Additional Funds Needed in 2022.

Problem Three (20 marks)

ABC is debating the purchase of a new digital printer. The printer they acquired 3 years ago for $1,800,000 is worth $1,200,000 today and will have a salvage value of $340,000 after 6 more years. The printer generates revenues of $660,000 per year. The costs of operating the printer are $340,000 per year. The company currently has $80,000 invested in operating net working capital. The investment in operating net working capital will remain at this level for the remaining 6 years of the project.

The new printer will cost $2,430,000. It will cost $120,000 to install the new printer. The new printer will generate revenues of $1,140,000 per year. In addition, the costs of operating the new printer will be $460,000 per year. The company will have to increase its investment in operating net working capital to $125,000 at time zero. Thereafter, operating net working capital will increase by $15,000 per year until the end of the project. At the end of 6 years, the new machine will have a salvage value of $520,000.

The companys corporate tax rate is 34%, the CCA rate is 30% and the required rate of return is 8%. Assume the asset class remains open.

Using net present value (NPV) calculation, determine if the company should purchase the new printer. Show all work.