3. (30 points) FINANCIAL PLANNING: Znap Inc. is a young company founded by a UCLA graduate. Annual Balance Sheet and Income Statement of Znap are provided below (as of Dec 31 2016). a) (40 points) Company would like to grow its sales by 25% from 2016 to 2017, Given the following conditions, produce Znap's proforma statements for 2017 1. Sales and Costs(COGS&Adm&Dep) grow at 25%. Interest for 2017 is 10% of 2017 Long Term Debt. (You can check to see that Interest was 10% of Long Term Debt for 2016 as well.) Tax rate is 20%. Company would like to preserve its dividend policy as in 2016. Company would like to purchase back $50 worth of its own stock in 2017 All accounts on the Assets side grow at the same rate as sales. Accounts Payable grows at the same rate as sales. Company's short term debt (Notes Payable) stays constant and no new stock will be issued in 2017 Company meets its external financing need by borrowing long term. 2. 3, 4. 5. 6. 7. 8. 9. b) (10 points) Can you use the External Financing Need formula to calculate Znap Inc.'s EFN without producing its proforma statements? Why or why not? Company ZNAP, Pro Forma Income Statement 2016 2017 Pro Sales Costs (COGS&Adm&D Interest Taxable Income Taxes Net Income Dividends Additions to Retained Earni $1,000 700 160 140 28 112 0 112 Company ZNAP, Pro Forma Balance Sheet 2017 (Projected) % of 2017 %of 2016 Sals (Projected) 2016 Sales Current Liabilities Current Assets Cash Accounts Receivable Invent Total Current Assets Net Fixed Assets 160 440 600 1,200 1,800 Accounts Payable Notes Payable Total Current Liabilities Long-Term Debt Owners' Stock Retained Earnin 300 100 400 1,600 112 Total Assets Total Liabilities and 3,000 Owners' 3,000