Complete a five-year forecast(2021 to 2025)based on the above assumptions.

Explain why the dividend payout ratio would be reduced and show the impact on dividends per sharecomparing 2020to 2021, which 2021reflects the lower payoutratio.

Based on 2021,explain if EMCis,more or less leveragedthan the competitors.

Management has indicated that a multiple of 9x EBITDA is reasonable to value the invested capital of the company.Explain if and why shareholder value has been created or reducedas a result of the SRCthe acquisition when comparing the 2020value per share (without the SRC acquisition) to the 2021value per share(with the SRC acquisition).

Income Statement . 2020 EMC revenue will increase at an annual rate of 4.0% The SRC acquisition will add $60.0 million of incremental revenue in 2021 and it will increase at an annual rate of 5.0% thereafter . Cost of services will be 62.0% of revenue SG&A expense will be 9.6% of revenue . Depreciation expense will be 7.0% of revenue last period debt outstanding Interest expense will be based on the average debt outstanding and an interest rate of 7.0% Tax rate of 25.0% Balance Sheet Constant operating cash level of $10.0 million FIN 3504 CASE ANALYSIS - Spring 2021 - EMC FORECASTING 6 Page Accounts receivable DSO of 32 days Inventory turnover of 29x (inventory consists of recyclable materials resold) Other long-term assets at 1.5% of cost of services (COS) . Accounts payable days cost of services (COS) of 45 days Accrued expense 1.5% of revenue Other long-term liabilities 1.7% of revenue Dividend payout ratio reduced to 45% from 70% historically Maintenance capital expenditures of 8.5% of revenue Acquisition capital expenditures are the cost of the SRC acquisition in 2021 ($185.0 million), no acquisition capx beyond 2021 EMC has 9 million shares outstanding . Income Statement . 2020 EMC revenue will increase at an annual rate of 4.0% The SRC acquisition will add $60.0 million of incremental revenue in 2021 and it will increase at an annual rate of 5.0% thereafter . Cost of services will be 62.0% of revenue SG&A expense will be 9.6% of revenue . Depreciation expense will be 7.0% of revenue last period debt outstanding Interest expense will be based on the average debt outstanding and an interest rate of 7.0% Tax rate of 25.0% Balance Sheet Constant operating cash level of $10.0 million FIN 3504 CASE ANALYSIS - Spring 2021 - EMC FORECASTING 6 Page Accounts receivable DSO of 32 days Inventory turnover of 29x (inventory consists of recyclable materials resold) Other long-term assets at 1.5% of cost of services (COS) . Accounts payable days cost of services (COS) of 45 days Accrued expense 1.5% of revenue Other long-term liabilities 1.7% of revenue Dividend payout ratio reduced to 45% from 70% historically Maintenance capital expenditures of 8.5% of revenue Acquisition capital expenditures are the cost of the SRC acquisition in 2021 ($185.0 million), no acquisition capx beyond 2021 EMC has 9 million shares outstanding