|The projected sales for the forecast period is $165,000. Assume that the payout ratio will be...

 

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|The projected sales for the forecast period is $165,000. Assume that the payout ratio will be maintained in the forecast period. The firm estimates that additional net fixed asset investment of $18,000 will be required during the forecast period. Assume that all current assets are spontaneous except Other Current Assets which is assumed not to change. Assume that all current liabilities except Notes Payable are spontaneous. A. Prepare the pro forma Balance Sheet and pro forma Income Statement. The EFR will be a plug number that makes the balance sheet balance like in the class example. B. Using the existing financial statements as your basis, estimate firm XYZ's EFR for the forecast period again, but this time using the cookbook model. Assume that the profit margin remains the same in the forecast period. Also based on the cookbook equation, how much funding is expected to come from each of the internal sources of funds (change in SL and retained earnings). If firm XYZ must maintain a minimum current ratio of 1.8 and a maximum debt ratio of 0.50, how would you propose the EFR be financed (how much short term debt, long term debt, and equity)? C. Based on your results in part B, prepare a Pro Forma Sources and Uses of Funds Statement to reflect the financing allocations that you decided on in part B. The only format change required is to break the total EFR down into the amounts of short term debt, long term debt, and new equity. You will have to use the numbers for ACA, ASL, addition to R.E., and EFR that you calculated in part B to make it balance, since they may be slightly different than those from part A. Explain the basis for your financing allocations. Percent of Sales Technique Homework XYZ Company Income Statement For the Year Ended 12/31/xxxx Sales $140,000 Cost of Goods Sold 117.000 Gross Profit 23,000 Operating Expenses 12,830 EBIT 10,170 Interest Expense 4,610 EBT 5,560 Taxes @ 39% 2,168 Net Income 3,392 Dividend 1,01 Addition to Retained Earnings $2,374 XYZ Company Balance Sheet 12/31/xxxx Assets Current Assets Cash $7,500 Accounts Receivable 12,100 Inventory 10,400 Prepaid Items 5,900 Other CA 4,300 Total Current Assets $40,200 Net Plant & Equipment 82,300 Total Assets $122,500 XYZ Company Balance Sheet 12/31/xxxX Liabilities & Equity Current Liabilities Accounts Payable $7,200 Wages Payable Notes Payable 3,600 5,400 Taxes Payable 4,200 Total Current Liabilities $20,400 Long Term Debt 35,700 $56,100 Total Liabilities Common Stock 28,700 Retained Earnings 37,700 Total Liabilities & Equity $122,500 |The projected sales for the forecast period is $165,000. Assume that the payout ratio will be maintained in the forecast period. The firm estimates that additional net fixed asset investment of $18,000 will be required during the forecast period. Assume that all current assets are spontaneous except Other Current Assets which is assumed not to change. Assume that all current liabilities except Notes Payable are spontaneous. A. Prepare the pro forma Balance Sheet and pro forma Income Statement. The EFR will be a plug number that makes the balance sheet balance like in the class example. B. Using the existing financial statements as your basis, estimate firm XYZ's EFR for the forecast period again, but this time using the cookbook model. Assume that the profit margin remains the same in the forecast period. Also based on the cookbook equation, how much funding is expected to come from each of the internal sources of funds (change in SL and retained earnings). If firm XYZ must maintain a minimum current ratio of 1.8 and a maximum debt ratio of 0.50, how would you propose the EFR be financed (how much short term debt, long term debt, and equity)? C. Based on your results in part B, prepare a Pro Forma Sources and Uses of Funds Statement to reflect the financing allocations that you decided on in part B. The only format change required is to break the total EFR down into the amounts of short term debt, long term debt, and new equity. You will have to use the numbers for ACA, ASL, addition to R.E., and EFR that you calculated in part B to make it balance, since they may be slightly different than those from part A. Explain the basis for your financing allocations. Percent of Sales Technique Homework XYZ Company Income Statement For the Year Ended 12/31/xxxx Sales $140,000 Cost of Goods Sold 117.000 Gross Profit 23,000 Operating Expenses 12,830 EBIT 10,170 Interest Expense 4,610 EBT 5,560 Taxes @ 39% 2,168 Net Income 3,392 Dividend 1,01 Addition to Retained Earnings $2,374 XYZ Company Balance Sheet 12/31/xxxx Assets Current Assets Cash $7,500 Accounts Receivable 12,100 Inventory 10,400 Prepaid Items 5,900 Other CA 4,300 Total Current Assets $40,200 Net Plant & Equipment 82,300 Total Assets $122,500 XYZ Company Balance Sheet 12/31/xxxX Liabilities & Equity Current Liabilities Accounts Payable $7,200 Wages Payable Notes Payable 3,600 5,400 Taxes Payable 4,200 Total Current Liabilities $20,400 Long Term Debt 35,700 $56,100 Total Liabilities Common Stock 28,700 Retained Earnings 37,700 Total Liabilities & Equity $122,500

Answer rating: 100% (QA)

XYZ Company Income Statement For the Year Ended 1231xxxx Projection Sales 140000 140000 16500000 Cos... View the full answer