2. Following are financial statements for one venture company. Balance Sheets Cash A/R Inventories Total current assets Fixed assets, net Total assets 2019 2020 (Projected) $ 50,000 $ 60,000 200,000 290,000 450,000 570,000 700,000 920,000 300,000 380,000 $ 1,000,000 $ 1,300,000 A/D Accruals Bank loan Total current liabilities Long-term debt Common stock ($1 par) Capital surplus Retained earnings Total liabilities and equity $ 140,000 $ 50,000 80,000 270,000 400,000 50,000 200,000 80,000 $ 1,000,000 $ 180,000 70,000 90,000 340,000 550.000 50,000 200,000 160,000 1,300,000 Income Statement Net sales COGS Gross profit Marketing General and administrative Depreciation EBIT Interest EBT Income taxes (40%) Net income $ 1,300,000 $ 780,000 520,000 130,000 150.000 40,000 200,000 45,000 155,000 62,000 93,000 $ 1,600,000 960,000 640,000 160,000 150,000 55,000 275,000 55,000 220,000 88,000 132,000 A. Determine the dollar amount of equity valuation cash flow for 2020, assuming that the cash account includes only required cash. B. Assuming that the required cash is set at 3.5% of sales, estimate the dollar amount of equity valuation cash flow for 2020. Additional cash would be surplus cash. C. Using the answer in part B, calculate the present value of the venture at the end of 2019 if investors want an annual rate of return of 20% and cash flows are expected to grow at 5% perpetually beginning in 2021. 2. Following are financial statements for one venture company. Balance Sheets Cash A/R Inventories Total current assets Fixed assets, net Total assets 2019 2020 (Projected) $ 50,000 $ 60,000 200,000 290,000 450,000 570,000 700,000 920,000 300,000 380,000 $ 1,000,000 $ 1,300,000 A/D Accruals Bank loan Total current liabilities Long-term debt Common stock ($1 par) Capital surplus Retained earnings Total liabilities and equity $ 140,000 $ 50,000 80,000 270,000 400,000 50,000 200,000 80,000 $ 1,000,000 $ 180,000 70,000 90,000 340,000 550.000 50,000 200,000 160,000 1,300,000 Income Statement Net sales COGS Gross profit Marketing General and administrative Depreciation EBIT Interest EBT Income taxes (40%) Net income $ 1,300,000 $ 780,000 520,000 130,000 150.000 40,000 200,000 45,000 155,000 62,000 93,000 $ 1,600,000 960,000 640,000 160,000 150,000 55,000 275,000 55,000 220,000 88,000 132,000 A. Determine the dollar amount of equity valuation cash flow for 2020, assuming that the cash account includes only required cash. B. Assuming that the required cash is set at 3.5% of sales, estimate the dollar amount of equity valuation cash flow for 2020. Additional cash would be surplus cash. C. Using the answer in part B, calculate the present value of the venture at the end of 2019 if investors want an annual rate of return of 20% and cash flows are expected to grow at 5% perpetually beginning in 2021
