Use the 2014 financial statements for Dynastatics, problem I6, and build a financial plan using a spreadsheet like that in Figure 19.2. Add $3,000,000 gross long-term assets and accumulated depreciation of ($2,200,000) to the 20I2 balance sheet. Thus 2014 net long-term assets are $3,000,000 - $2,200,000 = $800,000. Dynastatics is planning annual capital expenditure of $200,000 a year for the next five years, which will be added to gross long-term assets. Annual depreciation will be 10% net long-term assets of the previous year and added to the accumulated depreciation on the balance sheet. Maintain all other assumptions in problem 16. Add to the spreadsheet the financial ratios listed in problem 31.

a. Assuming that Dynastatics pays out two-thirds of net income as dividends and maintains a book debt ratio of 2S% of total capital, produce financial statements for 2013 to 20 17.
b. Maintaining the two-thirds dividend payout, but assuming that the balancing item is debt, prepare the 5 years of pro formas and compare the financial ratios to those in (a).

1 Model Inputs Base Year Formula for Column G Income Statement 2014 2015 2016 3 Sales growth rate 0.4 2,420.0 =F3"(1+$B$3) 2,178.0 =G3*$B$8 2,200.0 Revenue 2,000 0.1 4 Tax rate 1,800 1,980.0 Cost of goods sold 5 Interest rate 6 NWC/sales 7 Fixed assets/sales 0.4 8 COGS/sales 200 220.0 242.0 =G3-G4 0.1 EBIT 46.4 =$B$5*F20 0.1 40.0 Interest expense 40 Earnings before taxes 160 180.0 =G5-G6 195.6 =$B$4*G7 0.9 Taxes 64 72.0 78.2 96 108.0 117.4 =G7-G8 9 Payout ratio 2/3 Net income Dividends Addition to retained earnings =G9*$B$9 =G9-G10 10 64 72.0 78.2 11 32 36.0 39.1 12 Balance Sheet (year-end) 13 14 Assets: Net operating working capital Property, plant & equipment Total assets 242.0 =$B$6*G3 968.0 =$B$7*G3 15 200 220.0 800 880.0 16 1,100.0 =G15+G16 17 1,000 1,210.0 18 Liabilities and equity: 19 Long-term debt (note a) Shareholders' equity (note b) Total liab. & share. equity 20 400 464.0 534.9 =F20+G24 21 675.1 =F21+G11 600 636.0 1,210.0=G20+G21 1,000 1,100.0 23 Required external financing 70.9 24 64.0 =G17-F17-G11 25 26 27 Notes 28 (a) Long-term debt, the balancing item, increases by required external financing. 29 (b) Shareholders' equity equals its value in the previous year plus addition to earnings retained for the year. 30