1. The Pioneer Company is generating its proforma balance sheet for 20x2. For the year 20x1 sales were $5 million. Sales are expected to be $6 million in 20x2. The company expects its net profit margin for 20x2 to equal 8%. In each of the past several years, the company has been paying $90,000 in dividends to its stockholders. The company wants to increase dividends to $100,000 in 20x2. The 20x1 Balance Sheet for Pioneer is below. The Pioneer Company Balance Sheet as of December 31, 20x1 Cash $ 100,000 Accounts payable $ 600,000 Accounts receivable 400,000 Notes payable 150,000 Inventories 1,200,000 300,000 Fixed assets, net 500,000 Total assets $2.200.000 Long-term debt Stockholders' equity Total liabilities & equity 1,150,000 $2.200.000 Assume that Cash, Accounts Receivable, Inventories, and Accounts Payable vary directly with sales. Net Fixed Assets must increase by $200,000 to support the sales expansion. Notes payables are planned to increase by $50,000. A $100,000 long-term debt payment is required in 20x2. Any additional financing that Pioneer will need for 20x2 will come from new long-term debt, but Pioneer has a covenant that states that their ratio of total debt to total assets may not exceed 50%. How much additional financing will Pioneer need? Can they pay the increased dividend, increase their long-term debt, and still satisfy the covenant? Show numbers to support your answer. If Pioneer cannot meet the covenant, how much new equity must be used, instead of some of the new debt, to satisfy the covenant? They want to use as much new debt as they can. 2. Redo #1, but with an expected profit margin of 4%. All other assumptions remain the same. 1. The Pioneer Company is generating its proforma balance sheet for 20x2. For the year 20x1 sales were $5 million. Sales are expected to be $6 million in 20x2. The company expects its net profit margin for 20x2 to equal 8%. In each of the past several years, the company has been paying $90,000 in dividends to its stockholders. The company wants to increase dividends to $100,000 in 20x2. The 20x1 Balance Sheet for Pioneer is below. The Pioneer Company Balance Sheet as of December 31, 20x1 Cash $ 100,000 Accounts payable $ 600,000 Accounts receivable 400,000 Notes payable 150,000 Inventories 1,200,000 300,000 Fixed assets, net 500,000 Total assets $2.200.000 Long-term debt Stockholders' equity Total liabilities & equity 1,150,000 $2.200.000 Assume that Cash, Accounts Receivable, Inventories, and Accounts Payable vary directly with sales. Net Fixed Assets must increase by $200,000 to support the sales expansion. Notes payables are planned to increase by $50,000. A $100,000 long-term debt payment is required in 20x2. Any additional financing that Pioneer will need for 20x2 will come from new long-term debt, but Pioneer has a covenant that states that their ratio of total debt to total assets may not exceed 50%. How much additional financing will Pioneer need? Can they pay the increased dividend, increase their long-term debt, and still satisfy the covenant? Show numbers to support your answer. If Pioneer cannot meet the covenant, how much new equity must be used, instead of some of the new debt, to satisfy the covenant? They want to use as much new debt as they can. 2. Redo #1, but with an expected profit margin of 4%. All other assumptions remain the same