Balance sheet
	2016	2017	2018	2019	2020
ASSETS
Cash	274	339	358	379	400
Marketable securities	50	50	50	50	50
Accounts receivable	2,430	2,916	3,062	3,215	3,376
Inventories	2,916	3,062	3,215	3,376	3,544
Total current assets	5,670	6,367	6,685	7,019	7,370
Loans to dealers	225	225	225	225	225
Plant (net of depreciation)	3,248	4,256	4,921	5,552	6,152
Equipment (net of depreciation)	1,537	1,655	1,670	1,684	1,697
Total fixed assets	5,010	6,136	6,816	7,461	8,074
Total assets	10,680	12,503	13,501	14,480	15,444
LIABILITIES AND EQUITY
Accounts payable	1,823	2,187	2,296	2,411	2,532
Notes payables	0	0	0	0	0
Bank loan	975	975	975	975	975
Total current liabilities	2,798	3,162	3,271	3,386	3,507
Long-term load	0	0	0	0	0
Total fixed liabilities	0	0	0	0	0
Total current liabilities
Ordinary shares	1,206	1,206	1,206	1,206	1,206
Retained earnings	6,677	8,135	9,024	9,888	10,731
Total Liabilities and equity	10,680	12,503	13,501	14,480	15,444
Profit statement
	2016	2017	2018	2019	2020
Net Sales	16,200	19,440	20,412	21,433	22,504
Cost of goods sold
Material and labour	12,150	14,580	15,309	16,074	16,878
Overhead	1,296	1,555	1,633	1,715	1,800
Earnings before interest and tax	2,754	3,305	3,470	3,644	3,826
Interest expenses	72	140	120	120	120
Earnings before tax	2,682	3,165	3,350	3,524	3,706
Taxes at 40%	1,073	1,266	1,340	1,409	1,482
Earnings after tax	1,609	1,899	2,010	2,114	2,223
Dividends	300	300	300	300	300
Retained earnings	1,309	1,599	1,710	1,814	1,923
Cash flow statement
	2016	2017	2018	2019	2020
Net income from operations	1609	1899	2010	2114	2223
OPERATING ACTIVITIES
Adjustments to convert to cash basis
Accounts receivable increase	645	486	146	153	161
Inventories increase	951	146	153	161	168
Accounts payable increase	143	365	109	115	121
Depreciation	231	274	321	355	417
	156	1632	1820	1915	2015
FINANCING ACTIVITIES
Notes payable decrease	0	0	0	0	0
Bank loan increase	0	0	0	0	0
Dividends	300	300	300	300	300
	-300	-300	-300	-300	-300
INVESTING ACTIVITIES
Loans to dealers increase	0	0	0	0	0
Plant increase	548	1008	665	631	600
Equipment increase	22	118	15	14	13
	-570	-1126	-680	-645	-613
Decrease in cash	-714	206	840	970	1102

After reviewing the five-year financial forecast, Ms. Lender of the Commercial Bank makes several suggestions for Johnson.

Use your completed worksheet to analyze the following independent scenarios suggested by Ms. Lender. Assume long-term debt is incurred at the beginning of a year. Write a report to analysis and conclusions for each of the following scenarios.

a. Cut growth. By reducing the firms optimal capital budget, Johnson can reduce new capital expenditures to 200 for all years, which in turn will change the firms sales. Instead of the original growth rate, 2016 net sales will increase 10% over 2015, and then grow at an annual rate of only 2% thereafter.

b. Finance growth through long-term debt. Instead of cutting growth, Johnson can try to finance growth by incurring long-term debt, with year-end balances of 2,500, 2,500, 3,500, 4,000, 4,000 for 2016 to 2020 respectively.

c. Finance growth through new equity financing. Rather than financing growth using long-term debt, Johnson can issue new equity of 3,500 (net proceeds) in 2016.

d. Finance growth using a mix of long-term debt and new equity. Johnson can try to finance growth by issuing new equity of 1,750 in 2016, and long-term debt with year?end balances of 1,500, 1,800, 2,500, and 3,000 in the years 2017 to 2020 respectively.

e. Finance growth by improving cash receipts. Instead of issuing new equity and/or new long-term debt, Johnson can try to finance growth by cutting the percentage of credit sales so that accounts receivable is only at 5% of its total sales for each year, and reduce inventory to 5% of the next years sale by reducing dealer inventories.

f. Ms. Lender points out that if Johnson is successful in financing the desired growth, shareholders may want a higher level of dividends. Therefore, she suggests an analysis of the impact of a higher level of dividends on its financial plan: using the financial growth plan specified in (d), increase the total dividend payout to 450 for 2018 and beyond.