An analyst is making projections for a firm for fiscal year 2023.

The analyst has the following information:

• In 2022, the firms sales are 1000 (in thousands) and has an accumulated depreciation of 300 (thousands). Its retained earnings (balance sheet) is 95.
• Sales are expected to grow by 10% per year.
• Cost of goods sold will be 50% of sales.
• 30% of net income will be paid out as dividends.
• Fixed assets are predicted to be 80% of sales
• Fixed assets will be depreciated at 10% per year.
• Current assets are predicted to be 10% of sales
• Current liabilities are predicted to be 15% of sales
• The firm relies on debt AND equity financing to raise capital. It faces a cost of debt of 9%. It also aims to maintain a debt-to-equity ratio of 0.3 going forward.
• The firm faces 40% corporate income tax rates.

In this example,

• Depreciation Expense (t) = Depreciation Rate* Gross Fixed Assets (t)
• Interest Expense (t) = Interest Rate* Debt (t)

The firms pro forma statements look like the following:

Balance sheet:

Asset	Liabilities and Equity
Current Asset	Current Liabilities
Net Fixed Assets	Debt
( = GFA - Accum. Depr.)	Equity (stock + retained earnings)
Total Assets	Total Liabilities and Equity

Income statement:

Sales

- COGS

- Depreciation

- Interest Expense

= EBT

- Taxes

= Net Income

- Dividends

= Retained Earnings

Fill in the pro-forma statement for 2023. Compute the projected level of stock. What is the closet to?

Multiple Choice

• <20

• >=20 and <30

• >=30 and <40

• >=40 and <55

• >=55 and <70

• >=70 and <100

• >=100