Question
Consider the 2020 income statement given below. For the 2021 pro forma Income Statement, we have the following assumptions: Sales will increase by 20 percent.
Consider the 2020 income statement given below. For the 2021 pro forma Income Statement, we have the following assumptions:
Sales will increase by 20 percent.
Tax rate is 25%.
The dividend payouts will increase from 40 percent to 50 percent.
Income Statement 2020 Est. 2021 Sales 1,000
Variable Costs 500
Fixed Costs 160
Tax 85
Net Income 255
Dividends 102
Now consider the company's 2020 Balance Sheet. Our Pro Forma Balance Sheet assumptions for 2021 are: No additional Fixed Assets will be purchased.
2020 Notes Payable will be paid off at the end of that year.
No additional Common Stock will be issued.
Balance Sheet 2020 Est. 2021
Cash 1,000
Accounts Receivable 600
Inventory 800
Plant and Equipment 4,000
Total Assets 6,400
Accounts Payable 500
Notes Payable 500
Long Term Debt 4,000
Total Liabilities 5,000
Common Stock 1,000
Retained Earnings 400
Total Equity 1,400
Calculate the 2021 Income Statement and Balance Sheet projections, completing the above table on the WORKSHEET (round to the nearest dollar for each item) (10 pts.) Calculate the Additional Funds Needed for 2021 based upon the Pro Forma Balance Sheet, entering your answer below (rounded to the nearest dollar) (5 pts.)
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