The balance sheet and income statement shown below are for Pettijohn Inc.  Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over.

 

	Tax rate								35%
	Stock price								$22.00
	Shares outstanding								3,800,000
	Dividends are 50% of net income
	The firm is expecting a growth rate of 10% next year.  The firm is currently operating at 95% of capacity. The fixed assets can only by $10,000,000 increments.
Income Statement
Period Ending						31-Dec-20
Total Revenue						168,259,000
COGS						126,094,000
Selling General and Administrative						17,383,000
Depreciation						92,000
Earnings Before Interest and Taxes						24,690,000
Interest Expense						975,000
Income Before Tax						23,715,000
Income Tax Expense (35%)						8,300,250
Net Income						15,414,750
Balance Sheet
Date					31-Dec-20
Assets
Current Assets
		Cash			16,357,000
		Net Receivables			102,539,000
		Inventory			22,658,000
Total Current Assets					141,554,000
Property Plant and Equipment					82,441,000
Total Assets					223,995,000
Liabilities
Current Liabilities
		Accounts Payable			28,646,500
		Accruals			16,525,500
		Notes Payable			5,531,000
Total Current Liabilities					50,703,000
Long Term Debt					152,920,000
Total Liabilities					203,623,000
Stockholders' Equity
Common Stock					32,000
Retained Earnings					20,340,000
Total Stockholder Equity					20,372,000
Total Assets					223,995,000

 

 

Part 1.

Calculate the forecasted or proforma additions to retained earnings using the income statement and the information above.

 

Part 2.

Calculate the forecasted or proforma total assets using the balance sheet and the information above.

 

Part 3.

Calculate forecasted or proforma total liabilities and equity using the information above.

 

Part 4.

Calculate the additional or external funds needed to pay for the forecasted growth rate for the information above.

 

Part 5.

Suppose Yon Sun Corporation's free cash flow during the just-ended year (t = 0) was $125 million, and FCF is expected to grow at a constant rate of 3% in the future.  If the weighted average cost of capital is 12%, what is the firm's value of operations, in millions?

 

Use the following information for Parts 6 through 10 of the test.

A company is considering a project with forecasted annual sales of $5,750,000, the cost of goods sold is 70%, the selling, general, and administrative costs (fixed costs) are $630,000. The initial investment for this project is $6,000,000 and the tax rate is 30%. The initial investment will be depreciated using 5-year MACRS. The life of the project is 6 years. At the end of the project, the assets can be sold for $350,000. The annual interest rate is $250,000 and the dividends are 50% of net income. The project's required return, WACC is 10%.

 

Part 6.

Calculate the depreciation for each year of the project's life.

 

Part 7.

Calculate the project's cash flows.

 

Part 8.

Calculate the project's NPV.

 

Part 9.

Calculate the project's IRR.

 

Part 10.

Calculate the project's payback period.

Transcribed Image Text:

Use the following financial sheets and information for all parts. The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Tax rate Stock price Shares outstanding Dividends are 50% of net income The firm is expecting a growth rate of 10% next year. The firm is currently operating at 95% of capacity. The fixed assets can only by $10,000,000 increments. 35% $22.00 3,800,000 Income Statement Period Ending Total Revenue COGS Selling General and Administrative Depreciation 31-Dec-20 168,259,000 126,094,000 17,383,000 92,000 Earnings Before Interest and Taxes 24,690,000 Interest Expense 975,000 Income Before Tax 23,715,000 Income Tax Expense (35%) 8,300,250 Net Income Balance Sheet Date 15,414,750 31-Dec-20 Assets Current Assets Cash 16,357,000 Net Receivables 102,539,000 Inventory 22,658,000 141,554,000 Total Current Assets Property Plant and Equipment Total Assets 82,441,000 223,995,000 Liabilities Current Liabilities Accounts Payable 28,646,500 Accruals 16,525,500 Notes Payable 5,531,000 Total Current Liabilities 50,703,000 Long Term Debt 152,920,000 Total Liabilities 203,623,000 Stockholders' Equity Common Stock Retained Earnings 32,000 20,340,000 Total Stockholder Equity 20,372,000 Total Assets 223,995,000 Use the following financial sheets and information for all parts. The balance sheet and income statement shown below are for Pettijohn Inc. Note that the firm has no amortization charges, it does not lease any assets, none of its debt must be retired during the next 5 years, and the notes payable will be rolled over. Tax rate Stock price Shares outstanding Dividends are 50% of net income The firm is expecting a growth rate of 10% next year. The firm is currently operating at 95% of capacity. The fixed assets can only by $10,000,000 increments. 35% $22.00 3,800,000 Income Statement Period Ending Total Revenue COGS Selling General and Administrative Depreciation 31-Dec-20 168,259,000 126,094,000 17,383,000 92,000 Earnings Before Interest and Taxes 24,690,000 Interest Expense 975,000 Income Before Tax 23,715,000 Income Tax Expense (35%) 8,300,250 Net Income Balance Sheet Date 15,414,750 31-Dec-20 Assets Current Assets Cash 16,357,000 Net Receivables 102,539,000 Inventory 22,658,000 141,554,000 Total Current Assets Property Plant and Equipment Total Assets 82,441,000 223,995,000 Liabilities Current Liabilities Accounts Payable 28,646,500 Accruals 16,525,500 Notes Payable 5,531,000 Total Current Liabilities 50,703,000 Long Term Debt 152,920,000 Total Liabilities 203,623,000 Stockholders' Equity Common Stock Retained Earnings 32,000 20,340,000 Total Stockholder Equity 20,372,000 Total Assets 223,995,000