Can someone please have a look at this case and help me answer the questions related to it? It would be a huge help, thanks in advance!!

Smithfield Motors Part 2 - Building Purchase Current Date: late January 2016 This case describes a loan request of Smithfield Motors and builds upon Part 1, with the assumption the line of credit was increased to $500,000. You have just met with the owners of Smithfield Motors to sign the paperwork for their loan renewal. During the meeting, they indicated they would like to purchase a lot and small building along a feeder road next to the interstate that runs along the edge of town. They would like to move from their rented lot to this location and believe the better visibility will improve sales, plus they can build more equity in the business by owning rather than renting. The purchase price is $250,000, and they will need to add about $50,000 in improvements to suit the lot and building to their needs. They would like to borrow the full amount and set up a loan for a 20 year repayment. However, bank loan policy calls for at least a 20% down payment. If approved, the loan would be amortized on a 20 year basis, with equal monthly payments. The initial rate would be 7% to be adjusted annually. With the larger lot and improved visibility, they believe average monthly vehicle sales will increase from the current volume of 30 vehicles per month to a target of 35 to 40 vehicles per month (a 20% to 25% increase). The new facility will also allow for continued growth over the next several years. Initially, they will keep the target gross margin the same, until the new location has been established and sales grow. They then plan to boost the margin as well. Operating expenses other than cost of goods sold should be about the same in 2016 as they were in 2015, with the exception of advertising which will increase to about $30,000 to promote the new location. Concerning the balance sheet, inventory will increase about 20%, but other current assets (other than cash) will remain about the same. Liabilities other than the new bank loan will also remain about the same. Assignment Using the past financial statements provided by the owners and the information above, prepare a projected balance sheet, income statement, cash flow statement, and ratio analysis. Include statements from the past as well. For the balance sheet and income statement, include common size numbers as well as year over year percentage changes. Questions for discussion: 1. Do you have any additional questions for the owners? 2. What assumptions did you make in your preparation of statements? 3. What are the strengths and weaknesses of the credit? 4. What collateral is available for this loan? 5. How will this purchase and loan affect the balance sheet? 6. Will their current line of credit be sufficient for the expansion? 7. Is buying the new lot a building a good move for the business? 8. Should you grant the loan request? If so, what should be the amount of the loan? What is a potential source of the down payment? 1 Smithfield Motors Income Statement 12/31/12 12/31/13 2,910,720 3,470,808 2,668,320 3,185,952 242,400 284,856 12/31/14 5,359,200 5,031,600 327,600 12/31/15 6,048,000 5,571,000 477,000 125,000 6,000 16,845 1,000 40,000 18,000 5,000 160,000 8,000 17,952 1,000 42,000 18,000 6,500 200,000 12,000 18,695 6,000 45,000 18,000 9,000 325,000 12,000 29,652 1,000 50,000 18,000 10,000 2 3 Period Ending # Sales 5 Cost of Goods Sold 5 Gross Profit 7 3 Operating Expenses - Salaries 0 Advertising 1 utilities 2 Depreciation 3 Insurance 4 rent 5 Misc 6 7 Total Operating Expenses 8 9 o Operating Income (EBIT) 1 2 Interest Expense 3 4 Interest Income 5 6 Income Before Tax 7 8 Income Tax 9 211,845 253,452 308,695 445,652 30,555 31,404 18,905 31,348 19,256 16,478 23,191 23,741 0 0 0 0 11,299 14,926 -4,286 7,607 0 0 0 0 11,299 14,926 4,286 7,607 0 Net Income 1 12/31/14 12/31/15 1,053 Nm 000 3,770 22,856 424,650 6,254 454,813 32,651 428,620 7,126 472,167 15,000 11,000 4,000 0 0 4,000 15,000 12,000 3,000 0 0 3,000 1 Smithfield Motors 2 Balance Sheet 3 Period Ending 12/31/12 12/31/13 4 Current Assets 5 Cash and Equivalents 8,863 22,977 6 Short Term Investments 7 Net Receivables 23,521 25,684 8 Inventory 242,560 289,234 9 Other Current Assets 4,574 5,684 10 Total Current Assets 279,518 343,579 11 12 Gross Fixed Assets 10,000 10,000 13 Less: Depreciation 4,000 5,000 14 Net Property Plant and Equipment 6,000 5,000 15 Intangible assets 0 0 16 Other Long Term Assets 0 0 17 Total Long Term Assets 6,000 5,000 18 19 Total Assets 285,518 348,579 20 21 Current Liabilities 22 Accounts Payable 1,200 1,560 23 Line of Credit 225,840 274,630 24 Income tax payable 0 0 25 Other Current Liabilities 5,230 4,215 26 Total Current Liabilities 232,270 280,405 27 28 Bank Loan 0 29 Long Term Debt 0 0 30 31 Total Liabilities 232,270 280,405 32 33 Paid In Capital 50,000 50,000 34 Retained Earnings 3,248 18,174 35 Total Stockholder Equity 53,248 68,174 36 37 Total Liabilities and Stockholders Equity 285,518 348,579 28 458,813 475,167 1,420 386,520 0 6,985 394,925 2,350 395,680 0 5,642 403,672 OO OO OO OO 0 0 394,925 403,672 50,000 13,888 63,888 50,000 21,495 71,495 458,813 475,167 Smithfield Motors Part 2 - Building Purchase Current Date: late January 2016 This case describes a loan request of Smithfield Motors and builds upon Part 1, with the assumption the line of credit was increased to $500,000. You have just met with the owners of Smithfield Motors to sign the paperwork for their loan renewal. During the meeting, they indicated they would like to purchase a lot and small building along a feeder road next to the interstate that runs along the edge of town. They would like to move from their rented lot to this location and believe the better visibility will improve sales, plus they can build more equity in the business by owning rather than renting. The purchase price is $250,000, and they will need to add about $50,000 in improvements to suit the lot and building to their needs. They would like to borrow the full amount and set up a loan for a 20 year repayment. However, bank loan policy calls for at least a 20% down payment. If approved, the loan would be amortized on a 20 year basis, with equal monthly payments. The initial rate would be 7% to be adjusted annually. With the larger lot and improved visibility, they believe average monthly vehicle sales will increase from the current volume of 30 vehicles per month to a target of 35 to 40 vehicles per month (a 20% to 25% increase). The new facility will also allow for continued growth over the next several years. Initially, they will keep the target gross margin the same, until the new location has been established and sales grow. They then plan to boost the margin as well. Operating expenses other than cost of goods sold should be about the same in 2016 as they were in 2015, with the exception of advertising which will increase to about $30,000 to promote the new location. Concerning the balance sheet, inventory will increase about 20%, but other current assets (other than cash) will remain about the same. Liabilities other than the new bank loan will also remain about the same. Assignment Using the past financial statements provided by the owners and the information above, prepare a projected balance sheet, income statement, cash flow statement, and ratio analysis. Include statements from the past as well. For the balance sheet and income statement, include common size numbers as well as year over year percentage changes. Questions for discussion: 1. Do you have any additional questions for the owners? 2. What assumptions did you make in your preparation of statements? 3. What are the strengths and weaknesses of the credit? 4. What collateral is available for this loan? 5. How will this purchase and loan affect the balance sheet? 6. Will their current line of credit be sufficient for the expansion? 7. Is buying the new lot a building a good move for the business? 8. Should you grant the loan request? If so, what should be the amount of the loan? What is a potential source of the down payment? 1 Smithfield Motors Income Statement 12/31/12 12/31/13 2,910,720 3,470,808 2,668,320 3,185,952 242,400 284,856 12/31/14 5,359,200 5,031,600 327,600 12/31/15 6,048,000 5,571,000 477,000 125,000 6,000 16,845 1,000 40,000 18,000 5,000 160,000 8,000 17,952 1,000 42,000 18,000 6,500 200,000 12,000 18,695 6,000 45,000 18,000 9,000 325,000 12,000 29,652 1,000 50,000 18,000 10,000 2 3 Period Ending # Sales 5 Cost of Goods Sold 5 Gross Profit 7 3 Operating Expenses - Salaries 0 Advertising 1 utilities 2 Depreciation 3 Insurance 4 rent 5 Misc 6 7 Total Operating Expenses 8 9 o Operating Income (EBIT) 1 2 Interest Expense 3 4 Interest Income 5 6 Income Before Tax 7 8 Income Tax 9 211,845 253,452 308,695 445,652 30,555 31,404 18,905 31,348 19,256 16,478 23,191 23,741 0 0 0 0 11,299 14,926 -4,286 7,607 0 0 0 0 11,299 14,926 4,286 7,607 0 Net Income 1 12/31/14 12/31/15 1,053 Nm 000 3,770 22,856 424,650 6,254 454,813 32,651 428,620 7,126 472,167 15,000 11,000 4,000 0 0 4,000 15,000 12,000 3,000 0 0 3,000 1 Smithfield Motors 2 Balance Sheet 3 Period Ending 12/31/12 12/31/13 4 Current Assets 5 Cash and Equivalents 8,863 22,977 6 Short Term Investments 7 Net Receivables 23,521 25,684 8 Inventory 242,560 289,234 9 Other Current Assets 4,574 5,684 10 Total Current Assets 279,518 343,579 11 12 Gross Fixed Assets 10,000 10,000 13 Less: Depreciation 4,000 5,000 14 Net Property Plant and Equipment 6,000 5,000 15 Intangible assets 0 0 16 Other Long Term Assets 0 0 17 Total Long Term Assets 6,000 5,000 18 19 Total Assets 285,518 348,579 20 21 Current Liabilities 22 Accounts Payable 1,200 1,560 23 Line of Credit 225,840 274,630 24 Income tax payable 0 0 25 Other Current Liabilities 5,230 4,215 26 Total Current Liabilities 232,270 280,405 27 28 Bank Loan 0 29 Long Term Debt 0 0 30 31 Total Liabilities 232,270 280,405 32 33 Paid In Capital 50,000 50,000 34 Retained Earnings 3,248 18,174 35 Total Stockholder Equity 53,248 68,174 36 37 Total Liabilities and Stockholders Equity 285,518 348,579 28 458,813 475,167 1,420 386,520 0 6,985 394,925 2,350 395,680 0 5,642 403,672 OO OO OO OO 0 0 394,925 403,672 50,000 13,888 63,888 50,000 21,495 71,495 458,813 475,167