\begin{tabular}{|c|c|c|c|c|c|} \hline & \begin{tabular}{l} Thalance Shent, \\ izilgole \end{tabular} & & & & \\ \hline & Cant: & & 10 & Soln & 19000 \\ \hline & Acobests trovicatle & & & Opendt inat dipr) & san9 \\ \hline & lrveracien & & Hate & Depriatis: & \\ \hline & Tetal CA & & & EBIT & 55400 \\ \hline & Nes fixud antarts & & & Anesed & 149 \\ \hline & Totat anse & & cos3 & Frotak ronings & 53960 \\ \hline (1) & & & & Then cers & 900 \\ \hline & Acets. jay; A accruali & & $1,600 & Nainoner & \\ \hline & tive of cructit & & -9 & & \\ \hline & Tolalcl & & $1.500 & difined Mirne & \\ \hline & Losptarm dits & & Hon & Driluads & 51500 \\ \hline & Toed labilien & & 33,a00 & Natinse to ke: & sivt \\ \hline & Cintranes ntsck & & 2200 & Cinaniestarm & 30 \\ \hline & Rrtainod earniap: & & -570 & & 5394 \\ \hline & & & & tes & 5200 \\ \hline & Tutal lial ofolut & & Solve & & \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|c|c|} \hline & Hatily & Intura: & & & intery \\ \hline & & thes & Fual ravph oM: & 3.20 & \\ \hline DeriFA & in. & Is. & & 46% & \\ \hline Cadvales & 1% & 16 & Relin in npitr (ROE) & & is.s. \\ \hline Mecerinbiessiles & & 1% & & & lins \\ \hline Imigrionitusider & & & & & iss \\ \hline rient aubefialn & & 36 & Denteris & 2125 & \\ \hline & in: & & & & 17346 \\ \hline & 24% & sen & & in & 117 \\ \hline \end{tabular} Hatfield Medical Supply Income Statement and Additional Information (Milions of Dollars), December 31: Note: Hatfield was operating at full capacity in 2019. Also, you may observe small differences in items like the ROE when calculated in different ways. Any such differences are due to rounding and they can be ignored. Questions: f. Continue with the same assumptions for the No Change scenario from the previous question, but now forecast the balance sheet and income statements for 2020 (but not for the following three years) using the following preliminary financial policy. (1) Regular dividends will grow by 10%. (2) No additional long-term debt or common stock will be issued. (3) The interest rate on all debt is 8%. (4) Interest expense for long-term debt is based on the average balance during the year. (5) If the operating results and the preliminary financing plan cause a financing deficit, eliminate the deficit by drawing on a line of credit. The line of credit would be tapped on the last day of the year, so it would create no additional interest expenses for that year. (6) If there is a financing surplus, eliminate it by paying a special dividend. After forecasting the 2020 financial statements, answer the following questions. 1. How much will Hatheld need to draw on the line of credit? 2. What are some alternative ways than those in the preliminary financial policy that Hatfield might choose to eliminate the financing deficit? g. Repeat the analysis performed in the previous question, but now assume that Hatfield is able to improve the following inputs: (1) Reduce operating costs (excluding depreciation) to sales to 89.4% at a cost of $40 million. (2) Reduce inventories/sales to 14% at a cost of $10 million. (3) Reduce net fixed assets/sales to 38% at a cost of $20 million. This is the Improve scenario. 1. Should Hatfield implement the improvement plan? How much value would it add to the company? 2. How much can Hatfield pay as a special dividend in the Improve Scenario? What else might Hatfield do with the financing surplus
