Using the forecast assumptions provided in the year 2005 - Tire City Pro Forma Case Study and the attached template below, complete the Pro Forma:

1.) Income statements for the next two years ( In this example, interest expense will be calculated using the firm's prior year ending debt balance (Current portion + Long-term debt) which are years: 2006 and 2007,

2.) Project the liabilities and equity accounts for the next two years (2006 and 2007) to determine the additional (external) funds needed for Tire City for the next two years (2006 and 2007), and

3.) With the Tire City pro forma income statements completed, project the assets for the next two years (2006 and 2007).

INCOME STATEMENT

REQUIREMENT: Calculate for years 2005 2006 2007

Net sales $23,505  $28,206 $33,847 (20% growth per annum)

Cost of sales 13,612 (58% of sales - avg. 3 years)

Gross profit 9,893

Selling, general, & administrative expenses $7,471 - (32% of sales avg. 3 years)

Depreciation 213 Net interest expense - $94 (10% of prior year debt)

Pre-tax income 2,115

Income taxes $925 - (44% of pre-taxrs. income avg. 94 & 95)

Net income $1,190

Dividends $240 - (20% of net income avg. 3 years).

BALANCE SHEET

Assets

Cash $706

Accounts receivable $3,652 - (55.5 days - avg. 3 years)

Inventories 2,190

Total current assets $ 6,548

Gross plant & equipment $4,163

Accumulated depreciation $1,728

Net plant & equipment $2,435

Total Assets $8,983

Liabilities

Current maturities of long-term debt $125 $125 $125

Accounts payable 1,440 - (39 days - avg. 3 years)

Accrued expenses $1,653 - (7% of sales - avg. 3 years)

Total current liabilities $3,218

Long-term debt $750 $625 $500

Common stock 1,135

Retained earnings $3,880

Total shareholders' equity $5,015

Total Liabilities and Shareholders' Equity $8,983

External Financing Required

Answer rating: 100% (QA)

For the 2005 pretax ... View the full answer