1. Suppose you are a loan officer with Flyer Bank. Fulltext Corporation has approached you about a new long-term loan to replace all their existing borrowing (totaling $785 thousand at year-end 202. The new loan would be in the amount of $840 thousand and would be issued at the beginning of 2022. At that time, the existing notes payable and long-term debt would be repaid. The new loan would be repaid in four equal installments, with the first payment to be made at the end of 2022. Assume the interest rate on all existing and new debt is 10 percent, and interest expense is calculated on the previous year’s ending balance.

The management team at Fultex has provided you with the following projections:

	2022	2023	2024	2025
Sales growth (%)	15	15	10	10
Gross margin (%)	25	25	27	27
Increase in SG&A (%)	10	10	8	8
Depreciation (% of sales)	1.5	1.5	1.25	1.25
Cap. Exp. ($000s)	90	100	135	145
Inventory Turns	7.0	7.5	7.8	8.0
DSO	70	70	68	68
DPO	22	22	24	24
Accruals (% of sales)	4	4	4	4
Cash (% of sales)	2	2	2	2
Dividend payout ratio (%)	20	20	20	20

Using these projections, complete pro forma income statements and balance sheets for Fultex Corporation. Will Fultex be able to meet the repayment schedule?

Answer rating: 100% (QA)

To complete the pro forma income statement and balance sheet for Fultex Corporation we first need to ... View the full answer