Suppose you need to replace a long-term loan with existing borrowing totaling $785 thousand at year-end 2017.
Question:
Suppose you need to replace a long-term loan with existing borrowing totaling $785 thousand at year-end 2017. The new loan would be in the amount of $840 thousand and would be issued at the beginning of 2018. At that time, the existing notes payable and long-term debt would be repaid. The new loan would be repaid in 4 equal installments, with the first payment to be made at the end of 2018. The interest rate on all existing and new debt is 10% and interest expense is calculated on the previous year’s ending balance.
Using the table below, complete pro forma income statement and balance sheet for ATS company.
2018 | 2019 | 2020 | 2021 | |
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 | 2 |
Expert Answer:
To complete the pro forma income statement and balance sheet for ATS company we can use the information provided in the table and make assumptions about the companys financial performance First lets c... View the full answer
