Use the model in File C08 to solve this problem. Stendardi Industries 2015 financial statements are shown in the following table. Assume that the firm

Use the model in File C08 to solve this problem. Stendardi Industries’ 2015 financial statements are shown in the following table.

Assume that the firm has no excess capacity in fixed assets, that the average interest rate for debt is 12 percent, and that the projected annual sales growth rate for the next five years is 15 percent.
a. Stendardi plans to finance its additional funds needed with 50 percent short-term debt and 50 percent long-term debt. Using the projected balance sheet method, prepare the firm’s pro forma financial statements for 2016 through 2018. Determine the following: (1) the additional funds needed, (2) the current ratio, (3) the debt ratio, and (4) the return on equity.
b. Sales growth could be five percentage points higher or lower than the projected 15 percent. Determine the effect of such variances on AFN and the key ratios.
c. Perform an analysis to determine the sensitivity of AFN and the key ratios for 2018 to changes in the dividend payout ratio as specified in the following, assuming that sales grow at a constant 15 percent. What happens to Stendardi’s AFN if the dividend payout ratio
(1) Increases from 40 percent to 70 percent
(2) Decreases from 40 percent to 20percent?

Stendardi Industries: Balance Sheet as of December 31. 2015 ($ millions Cash Receivables Inventories 8.0 $4.0 Accounts payable 12.0 Notes payable 16.0 Current liabilities S13.0 12.0 20.0 27.0 Current assets S32.0 Long-term debt Net fixed assets 40.0 Common stock Retained earnings Total assets Total liabilities and equity Stendardi Industries: Income Statement as of December 31, 2015 (5 millions) S80.0 (71.3) S 8.7 2.0) S 6.7 2.7 Operating costs Earnings hefore interest and taxes Earnings before taxes Taxes (40%) Net incorme Dividends (40%) Addition to retained earnings S 4.0 1.60 S 2.40