Problem 17.1: Minelli Enterprises projects next year's sales to be 21 million. Current year's sales are...

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Problem 17.1: Minelli Enterprises projects next year's sales to be 21 million. Current year's sales are at $18 million, based on current assets of $7.5 million and fixed assets of $8 million. The firm's net profit margin is 5 percent after taxes for both years. Minelli forecast that next year's current assets will rise in direct proportion to the increase in sales, but that fixed assets will increase by only $250,000. Currently, Minelli has $1.8 million in accounts payable (which vary directly with sales for next year), $6.7 million in long-term debt (due in 10 years), and owners' equity totaling 7 million. Included in the current year total owners' equity is retained earnings of 4 million. Minelli plans to pay $700,000 in common stock dividends next year. a. Complete the current year balance sheet noting that you will need to 'back into' the common stock/paid-in- capital. b. What are Minelli's total financing needs (that is, total assets) for the coming year? c. Given the firm's projections and dividend payment plans, forecast next year's full balance sheet and determine what are its discretionary financing needs? (Hint: See table 17.2 on page 560 and remember the Balance Sheet must 'balance') INCOME STATEMENT sales net income 2 dividends B 4 BALANCE SHEET current year % of sales next % of year sales 5 6 27 current year % of sales next year % of sales 28 current assets 29 net fixed assets 30 TOTAL ASSETS 31 32 accounts payable 33 long-term debt 34 TOTAL LIABILITIES 35 common stock/paid-in capital 36 37 38 39 40 retained earnings COMMON EQUITY TOTAL LIABILITIES & OE Part B - DISCRETIONARY FINANCING NEEDED TOTAL FINANCING NEEDED TOTAL ASSETS 41 42 Problem 17.1: Minelli Enterprises projects next year's sales to be 21 million. Current year's sales are at $18 million, based on current assets of $7.5 million and fixed assets of $8 million. The firm's net profit margin is 5 percent after taxes for both years. Minelli forecast that next year's current assets will rise in direct proportion to the increase in sales, but that fixed assets will increase by only $250,000. Currently, Minelli has $1.8 million in accounts payable (which vary directly with sales for next year), $6.7 million in long-term debt (due in 10 years), and owners' equity totaling 7 million. Included in the current year total owners' equity is retained earnings of 4 million. Minelli plans to pay $700,000 in common stock dividends next year. a. Complete the current year balance sheet noting that you will need to 'back into' the common stock/paid-in- capital. b. What are Minelli's total financing needs (that is, total assets) for the coming year? c. Given the firm's projections and dividend payment plans, forecast next year's full balance sheet and determine what are its discretionary financing needs? (Hint: See table 17.2 on page 560 and remember the Balance Sheet must 'balance') INCOME STATEMENT sales net income 2 dividends B 4 BALANCE SHEET current year % of sales next % of year sales 5 6 27 current year % of sales next year % of sales 28 current assets 29 net fixed assets 30 TOTAL ASSETS 31 32 accounts payable 33 long-term debt 34 TOTAL LIABILITIES 35 common stock/paid-in capital 36 37 38 39 40 retained earnings COMMON EQUITY TOTAL LIABILITIES & OE Part B - DISCRETIONARY FINANCING NEEDED TOTAL FINANCING NEEDED TOTAL ASSETS 41 42