Complete the questions using the formula sheet given at the end

The financial statements for DTS, Den Store Taber (from assignment #2 ), are at the end of this assignment. Use them to answer the following questions regarding the Percent of Sales Model. The marketing team has big plans; in fact they've just made a presentation involving a sales increase of 40% relative to the 2022 sales year. Assume that interest on all debt is uniformly 14%, and that Den Store is now considered to be a large corporation (which does not qualify for small business tax breaks) and pays taxes at a 28% combined federal and provincial rate. 1. Regarding Revenues.... 1a. What will projected revenues be? 1b. Challenge Question: Which expenses on the P\&L Statement will increase by 40%, and which will not? 2. Regarding Asset Purchases.... (For all of Q2, you may round answers to the nearest $.) 2a. Assuming assets vary directly with sales, by how much will assets need to be increased to support the projected sales increase? 2b. However, Den Store Taber isn't fully utilizing its PPE. It has a lot of idle capacity - PPE is functioning only at 75% capacity. This unused capacity will be put to work first, and only then will more PPE assets be purchased. Given this, what will PPE increase by to meet the proposed sales increase? 2c. Now reconsider your answer to Q1a. Given that management at DTS intends to more fully utilize their PPE, what do total assets need to increase by in order to achieve the increase in sales? 3. Regarding a couple of ratios.... 3a. What was Den Taber's D/E ratio in 2022? 3b) What was Den Taber's Payout Ratio in 2021 (not 2022)? (For this one calculationand only this one - I want you to look at 2021 data, not 2022 data.) 4. Regarding new debt to be issued... (For all of Q4 you may round answers to the nearest $. .) 4a. First, no matter what your answer was to Q3a, let's assume the D/E ratio is 2/1. (Use this no matter what your actual answer was -1 want everyone to use the same ratio ..2/1 for their calculations.) Determine the debt-equity mix for the purchase - that is, how much of the new assets to be purchased will be financed with debt and how much with equity? 4b. How much total debt will DTS ultimately be carrying? 5. Regarding retained earnings to be used.... (For all of Q5 you may nound answers to the nearest 5 .) 5a. What is your estimate of NI if sales were to increase by 40% ? (The standard assumption here would be that both CoGS and Operating Expenses would also increase by 40%.) 5 b. Now, let's assume the payout ratio is .25. (Use this no matter what your actual answer was to Q3b.) Furthermore, let's say that management wants to maintain this ratio. How much will retained earnings be? 6. Regarding new equity to be issued.... (Far all of Q6 you may round your answers to the nearest dollar.) 6a. What will the financing package be for the purchasing of additional assets? 6 b. How much worth of new equity needs to be issued? 6c. What was the IGR for Den Taber for 2022? Assume a payout ratio of .25 and use the IGR formula with the plowback ratio in it. 6d. Challenge Question: What insight does the value of the IGR give you into how they're having to finance the asset expansion? 7. Calculate the length of DST's operating cycle for 2022. 8. Regarding the Cash Conversion Cycle.... 8a. Calculate the length of DST's 2022 cash conversion cycle. 8b. Challenge Question: Interpret DST's cash conversion cycle and tell me who's apparently doing a good job and who isn't. 9. The owners of Le trou de l'aryent of Trois-Rivires, which specializes in high-end snowmobiles, are piloting a new sales approach: They've opened a small pop-up shop across from the food court (the highest traffic area) in the Champlain Mall in Moncton. It will operate October through January. They'll carry only the most high-performing and expensive models, such as the Yamaha Sidewinder S-TX and the Alpina Superclass 1.2LVVT, each of which will set you back $30,000 all-in. They will have only six models on display and only a handful more in the backroom. They hope to sell 100 of the snow machines during the season -and since the season equals their sales year, they thus expect to sell 100 for the year. Given the square-footage of the Moncton store, and the extra-high rate paid for the prime location and short-term lease (during the most important sales quarter of the year), carrying costs are estimated at $6,000 per snowmobile (annualized). When they order, they 11 purchase from a wholesaler in Montral that will charge them a flat fee of $1,500 per order, no matter how many snowmobiles they order. Given all this information, what is their optimal onder size? 10. Based on data collected from ATV sales in their Trois-Rivires store, management at Le trou de l'argent expect 25% of the Moncton sales to be in cash - some rich people just pay for these things in cash! However, they will extend 30 days of credit to customers, and that will amount to about 60% of sales, and 60 days of credit to preferred customers, who will make up 15% of sales. They ve hired Benny the Loan Shark to handle their receivables and so do not expect any late payments or bad debt. Here is the four month sales forecast (in thousands of dollars): October =150, November =480, December =1680, January =690 Build a complete Receivables Budget through the end of March and tell me specifically what receivables will be at the end of December. 11. The anticipated cash situation is this: As far as inventory purchases are concemed, they generally run 50% of sales, and the purchasing agent at Le trou de l'argent pays for 75% of that in cash, and the remaining 25% is paid within 30 days. The company has operating payments of $47,500 per month during the operating months (October through January). Capital outlays will consist of $125,000 in October for display equipment for the new store. Financial costs include $22,500 that is being put into a GIC monthly during the four months of operation. (The GIC is separate from the company's bank account and is used to accumulate money for tax purposes.) Anticipating a cash crunch, management has already lined up a $1,000,000 bank loan for December. The bank loan is to be paid back during January through March, at the rate of 340,000 per month. Develop a cash budget showing money flowing into and out of Le trou's bank account for six months: October through March. 12. Finally, develop a short-term financing schedule for the four operating months (October through January). Assume the mangers want to have a cash balance of $100,000 in the bank account at the start of every month. 10. Based on data collected from ATV sales in their Trois-Rivires store, management at Le trou de l'argent expect 25% of the Moncton sales to be in cash- some rich people just pay for these things in cash! However, they will extend 30 days of credit to customers, and that will amount to about 60% of sales, and 60 days of credit to preferred customers, who will make up 15% of sales. They've hired Benny the Loan Shark to handle their receivables and so do not expect any late payments or bad debt. Here is the four month sales forecast (in thousands of dollars): October =150, November =480, December =1680, January =690 Build a complete Receivables Budget through the end of March and tell me specifically what receivables will be at the end of December. 11. The anticipated cash situation is this: As far as inventory purchases are concemed, they generally run 50% of sales, and the purchasing agent at Le trou de l'argent pays for 75% of that in cash, and the remaining 25% is paid within 30 days. The company has operating payments of $47,500 per month during the operating months (October through January). Capital outlays will consist of $125,000 in October for display equipment for the new store. Financial costs include $22,500 that is being put into a GIC monthly during the four months of operation. (The GIC is separate from the company's bank account and is used to accumulate money for tax purposes.) Anticipating a cash crunch, management has already lined up a $1,000,000 bank loan for December. The bank loan is to be paid back during January through March, at the rate of 340,000 per month. Develop a cash budget showing money flowing into and out of Le trou's bank account for six months: October through March. 12. Finally, develop a short-term financing schedule for the four operating months (October through January). Assume the mangers want to have a cash balance of $100,000 in the bank account at the start of every month. PVP=C/r=( cash payment )/( interest rate ) or A/r= (a single annuity payment )/( interest rate ) PV( bond )=PV( coupons )+PV( face value ) Current Yield = coupon /P0 1-Year RORbond=(P1P0+ coupon )/(P0) 1 Year ROR stock =(P1P0+div1)/(P0) P0=div0/r P0=div1/(rg) r=(div1/P0)+g NPV=PV (of all future cash inflows and outflows) - required investment PI=(NPV/ initial investment ) Dividend Yield =(div1/P0) Capital Gain =(P1P0)/(P0) WACC =(% LT debt )( YTM )+(% ST debt )( interest rate on ST debt )+(% equity )( cost of equity ) Cost of Equity = ROR stocks = the " r " from this formula: P0= div 1/(rg) IGR=RE/ Assets Operating cycle = inventory period + receivables period Cash conversion cycle = inventory period + receivables period - payables period Inventory period =( inventory )/(CoGS/365) Receivables period =( accounts receivable )/( sales /365) Payables period =( accounts payable )/(CoGS/365) Beginning receivables + sales - collections on sales at t0 - collections on sales at t1 - collections on sales at t2 - etc. = Ending receivables Sources of cash - uses of cash = net cash flow Begin cash \pm net cash flow = end cash and End cash - min cash balance = financing required EOC =(2(annualamountused)(costperorder)(carryingcost) \begin{tabular}{|c|c|} \hline Market value of equity & (current price)x(\# shares outstanding) \\ \hline NOPAT & EBIT - (tax rate)x(EBIT) \\ \hline Total capitalization & debt t+ equity t= loanst t(ST)+ bond t(LT)+ stock t \\ \hline Market-to-book ratio & market value of equity/book value of equity \\ \hline Return on equity (ROE) & NI4/ equity l1 \\ \hline Return on assets (ROA) & \\ \hline Return on capital (ROC) & NOPAT t/( total capitalization r1) \\ \hline Asset turnover & revenue t/ total assets t1 \\ \hline Inventory turnover & CoGSA/ average inventories \\ \hline Average days in inventory & 365/ inventory turnover \\ \hline Receivables turnover & revenues //(average A/R) \\ \hline Average collection period (days) & 365/ receivables turnover \\ \hline Proft margin & NIt/ salest t \\ \hline Debt ratio & ( ST loans st+ LT debt tt)/( ST loanst + LT debt tt+ equity t) \\ \hline Times interest earned & EBIT 4/ interest expense t \\ \hline Current ratio & current assets / current liabilities 4 \\ \hline Quick ratio & ( cash t+ current investments t+A/Rt)/ current liabilitiest \\ \hline Cash ratio & ( cash t+ current investments t)/ current liabilities t \\ \hline Payout ratio & dividends 4/NI4 \\ \hline Plowback ratio & (NIt dividends t)/NIt \\ \hline Sustainable growth & (1 - payout ratio) ROE or (NIt - dividends t)/ equity t1 \\ \hline \end{tabular}