CASE 1 (35 points)

The 2019 financial statements for Assol Corporation follow. Assets, costs, and current liabilities are proportional to sales. Long-term debt and equity are not. The company maintains a constant 40 percent dividend payout ratio. As with every other firm in its industry, next years sales are projected to increase by exactly 15 percent. The firm is operating at full capacity and no new debt or equity is issued.

income statement Balance sheet

Sales $7,900	Current assets $3,900	current liabilities $2,100
Costs 5,500	Fixed assets 8,600	Long-term debt 3,700
Taxable income $2,400	______	Equity 6,700
Taxes (25%) 600	Total $12,500	Total $12,500
Net Income $1,800

0. Instructions:

   1. Prepare Proforma Income Statement for 2020. Calculate Dividends and Addition to retained earnings in 2020. (10 points)

   2. Prepare Proforma Balance Sheet for 2020. (10 points)

   3. Calculate the amount of external financing needed in 2020. What financing options are available for the company? (5 points)

   4. Assuming that the company operated at 75% capacity in 2019, re-calculate Proforma Total Assets in 2020. (5 points)

   5. How would you approach predicting next year's sales? Explain. (5 points)