AFM Final Subjective Online 2020 BBA (Protected View) - Word File Home Insert Design Layout References Tell me what you want to do PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Mailings Review View Help Enable Editing Page 1 of 3 I 608 words 1. Question 2: Morrissey Technologies Inc.'s 2016 financial statements are shown here. Morrissey Technologies Inc.: Balance Sheet as of December 31, 2016 Cash $180,000 Accounts payable $360,000 Receivables 360,000 Notes payable 56,000 Inventories 720,000 Accrued liabilities 180,000 Total current assets $1,260,000 Total current liabilities $596,000 Please turn over Continued From Overleaf Page 1 of 3 Long-term debt 100,000 Fixed assets 1,440,000 Common stock 1,600,000 Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000 Morrissey Technologies Inc.: Income Statement for December 31, 2016 Sales Operating costs including depreciation $3,600,000 3,279,720 Ammad Rana ENIGMA Share x 4:01 PM 6/16/2020 100% AFM Final Subjective Online 2020 BBA (Protected View) - Word File Home Insert Design Layout References Mailings Review View Help Tell me what you want to do PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit, it's safer to stay in Protected View. Enable Editing Retained earnings 204,000 Total assets $2,700,000 Total liabilities and equity $2,700,000 Morrissey Technologies Inc.: Income Statement for December 31, 2016 Sales $3,600,000 Operating costs including depreciation 3,279,720 EBIT $320,280 Interest 20,280 EBT Taxes (40%) Net Income Per Share Data: Common stock price Earnings per share (EPS) Dividends per share (DPS) $300,000 120,000 $180,000 $45.00 $1.80 $0.20 Page 2 of 3 B 608 words Suppose that in 2017, sales increase by 25% over 2016 sales. The firm currently has 200,000 shares outstanding. It expects to maintain its 2016 dividend payout ratio and believes that its assets should grow at the same rate as sales. The firm has no excess capacity. However, the firm would like to reduce its operating costs/sales ratio to 78.5%. The firm will raise 30% of the 2017 forecasted interest-bearing debt as notes payable, and it will issue long-term bonds for the remainder. The firm forecasts that its before-tax cost of debt (which includes both short-term and long-term debt) is 8.5%. Assume that any common stock issuances or repurchases can be made at the firm's current stock price of $45. Construct the forecasted financial statements assuming that these changes are made. What are the firm's forecasted notes payable and long-term debt balances? What is the forecasted addition to retained earnings? Round your answers to the nearest cent. (6 marks) Ammad Rana ENIGMA Share 4:02 PM 100% 6/16/2020