Consider the following statement of financial position and income statement for Lewis Company.

Lewis Company

Statement of Financial Position as of December 31, 2019

(In thousand pesos) Assets Liabilities and Equity Cash P 80 Accounts Payable P 160 Accounts Receivable 240 Accruals 40 Inventory 720 Notes Payable 252 Total Current Assets P1,040 Total current liabilities 452 Fixed Assets 3,200 Long-term debt 1,244 Total debt 1,696 Common Stock 1,605 Retained Earnings 939 Total Assets P4,240 Total Liabilities and Equity P4,240

Lewis Company

Income Statement for the year ended December 31,2019

(in thousand pesos) Sales P8,000 Operating Costs 7,450 EBIT 550 Interest 150 EBT 400 Taxes (40%) 160 Net Income 240 Per share data: Common stock price P16.96 EPS P 1.60 Dividend per share P 1.04 Required: a. The firm operated at full capacity in 2011. It expects sales to increase by 20% during 2012 and expects 2012 dividends per share to increase to P1.10. Use the projected financial statement method to determine how much outside financing is required, developing the firms pro forma statement financial position and income statement, and use AFN as balancing item. b. If the firm must maintain a current ratio of 2:3 and the debt ratio of 40%, how

much financing, after the first pass will be obtained using notes payable, long- term debt, and common stock.

c. Make a second pass financial statements incorporating financing feedbacks, using the ratio in (b). Assume that the interest rate on debt averages 10%.

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