blems: Chapter 09 - Corporate Valuation and Financial Planning Operating costs 32,440 Earnings before interest and taxes $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) $ 837 Addition to retained earnings $ 1,023 a. Suppose 2016 sales are projected to increase by 20% over 2015 sales. Use the forecasted financial statement method forecast a balance sheet and income statement for December 31, 2016. The interest rate on all debt is 7%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year, Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to incre by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest whole number. Do not round intermediate calculations. Enter your answer in thousands of dollars. Total assets S AFN est whole number D Practice Problems: Chapter 09 - Corporate Valuation and Financial Planning Balance Sheet as of December 31, 2015 (Thousands of Dollars) Cash $ 1,080 Accounts payable Receivables 6,480 Accruals $ 4,320 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 2,100 Notes payable Total current liabilities Net fixed assets 12,600 $ 9,300 3,500 3,500 12,860 $29,160 Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2015 (Thousands of Dollars) Sales $36,000 Operating costs 32,440 Earnings before interest and taxes $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) S837 Addition to retained earnings $ 1,023 Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest whole number. Do not round Intermediate calculations. Enter your answer in thousands of dollars. Total assets $ AFN $ b. What is the resulting total forecasted amount of the line of credit? Round your answers to the nearest whole number. Do not round intermediate calculations. Enter your answer in thousands of dollars. Notes payable (including line of credit) $ blems: Chapter 09 - Corporate Valuation and Financial Planning Operating costs 32,440 Earnings before interest and taxes $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) $ 837 Addition to retained earnings $ 1,023 a. Suppose 2016 sales are projected to increase by 20% over 2015 sales. Use the forecasted financial statement method forecast a balance sheet and income statement for December 31, 2016. The interest rate on all debt is 7%, and cash earns no interest income. Assume that all additional debt in the form of a line of credit is added at the end of the year, which means that you should base the forecasted interest expense on the balance of debt at the beginning of the year, Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to incre by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest whole number. Do not round intermediate calculations. Enter your answer in thousands of dollars. Total assets S AFN est whole number D Practice Problems: Chapter 09 - Corporate Valuation and Financial Planning Balance Sheet as of December 31, 2015 (Thousands of Dollars) Cash $ 1,080 Accounts payable Receivables 6,480 Accruals $ 4,320 2,880 Inventories 9,000 Line of credit 0 Total current assets $16,560 2,100 Notes payable Total current liabilities Net fixed assets 12,600 $ 9,300 3,500 3,500 12,860 $29,160 Mortgage bonds Common stock Retained earnings Total assets $29,160 Total liabilities and equity Income Statement for December 31, 2015 (Thousands of Dollars) Sales $36,000 Operating costs 32,440 Earnings before interest and taxes $ 3,560 Interest 460 Pre-tax earnings $ 3,100 Taxes (40%) 1,240 Net income $ 1,860 Dividends (45%) S837 Addition to retained earnings $ 1,023 Use the forecasted income statement to determine the addition to retained earnings. Assume that the company was operating at full capacity in 2015, that it cannot sell off any of its fixed assets, and that any required financing will be borrowed as notes payable. Also, assume that assets, spontaneous liabilities, and operating costs are expected to increase by the same percentage as sales. Determine the additional funds needed. Round your answers to the nearest whole number. Do not round Intermediate calculations. Enter your answer in thousands of dollars. Total assets $ AFN $ b. What is the resulting total forecasted amount of the line of credit? Round your answers to the nearest whole number. Do not round intermediate calculations. Enter your answer in thousands of dollars. Notes payable (including line of credit) $
