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Assumptioms- The company will most likely experirence a 50% growth rate. The owners believed they would need to purchase state-of-the-art industrial sewing machines, cutting tables,
Assumptioms-
The company will most likely experirence a 50% growth rate.
The owners believed they would need to purchase state-of-the-art industrial sewing machines, cutting tables, and pressing machines at a cost of $280,000. The new equipment would be depreciated over 14 years, using straight-line depreciation.
1.Cash, accounts receivable, and inventory would follow their same relationships to sales as in the past two years; that is, each asset would maintain the average asset-to-sales percentages experienced in 2012 and 2013.
2. Both cost of goods sold and marketing expenses are variable and would approximate the same percentage of sales as in 2012 and 2013.
3. General and administrative costs are fixed in nature but should increase to $130,000 in the next year.
4. The interest rates on the already outstanding debt would be renegotiated, which would reduce the inter-est on this debt to $45,000.
5. The firms tax rate should be about 40 percent.
question -1. Given the assumptions that Jantz and Palmer have made, prepare a pro forma income statement for 2014. Assume that the line of credit provided by the bank will be needed for the full year. Use the prior years pro forma statements as examples.
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