11.1.12 113 114 115 116 14 18 19 Problem 1 Suppose, you were hired by Fleury, Inc., to assist the company with its financial planning and to evaluate the company's performance. Your supervisor provides you with the most recent income statement and balance sheet of GEM, Inc. (provided in the Excel template). The capacity utilization rate in 2019 was 90% Sales for 2020 are projected to grow by 20 percent. The dividend payout rate will remain constant in the new year, interest rate will be 5% and tax rate will be 30% in the forecasted year. Regardless of the external financing need, the long-term debt is expected to decrease by 30% in the forecasted year. Based on the information, answer the following questions: 1. If the firm is operating at full capacity (100%) and no new equity is issued, what is the external financing needed (EFN) under the percentage of sales approach to support the 20 percent sales growth? (17.5 points) 2. Identify two Income Statement accounts and two Balance Sheet accounts of Fleury, Ine which do not change proportionally with the changes in sales in the forecasted year under the percentage of sales approach. (5 Points) 3. How is the capacity utilization rate related to the fixed assets investment? Hints: how do you decide whether you need to make additional investment in fixed-assets. (5 Points) Input FLEURY, INC. 2019 Income Statement Sales Costs Other expenses EBIT Interest expense Taxable income Taxes Net income 891,600 693,600 18,240 179,760 13,400 166,360 58.226 108.134 Other Inputs Sales Growth Capacity Utilization in 2019 Changes in Long-Term Debt Interest Rate in 2020 Tax rate in 2020 20.0096 90% -3096 595 30.00% 1 Dividends Add to retained earnings 88 Balance Sheet as of December 9215 NC Liabilities & Equ 20 Current Assets Cash Accounts rec. Inventory 24 Total CA 24,280 37,070 83,400 144,750 Current Liabilities Accounts Paya Notes Payable Total Ci. 65.200 16,320 81,520 - 25 Long term debt 155,000 26 28 Fixed assets Net PPLE 396.500 130.000 174,730 30 31 Shareholder Equ Common stock Retained earnin Total Equity Total L&E 32 Total Assets 541.250 541.250 Dividend payout ratio Calculation & Output FLEURY, INC. Proforma Income Statemen 38 Sales 39 Casts 40 Other expenses 41 EBIT 42 Interest expense 43 Taxable income 44 Taxes 45 Net income 46 Dividends 47 Add To RE Fixed Asset Calculation Full capacity sales Fixed assets/sales at full capacity 52 53 Current Assets Cash Accounts rec Inventory Total CA FLEURY, Inc. Proforma Balance Sheet (External Financing Calculation Liabilitia Current Liabilities Accounts Payable Notes Payable TotalCL 55 56 57 Long-term debt 58 Fixed assets 59 Net PP&E Shareholder Equity Common stock Retained earnings Total Equity 62 63 64 Total Assets Total ISE