Corporate Finance

Nittinan, Inc. 2019 Income Statement ($ in millions) Net sales Less: Cost of goods sold Less: Depreciation expense Less: Other expenses Earnings before interest and taxes Less: Interest paid Taxable income Less: Taxes (40%) Net income $3,345,000 2,495,000 20,000 85,000 745,000 100,000 $645,000 258,000 $387,000 Dividends Additions to Retained Earnings $116,100 $270,900 Nittinan, Inc. 2018 and 2019 Balance Sheets ($ in millions) Cash Accounts rec. Inventory Total Net fixed assets 2018 2019 175,000 171,000 Accounts payable 115,000 155,000 Notes payable 95,000 105,000 Total 385,000 431,000 Long-term debt 1,000,000 1,150,000 Common stock Retained earnings 1,385,000 1,581,000 Total liab.& equity 2018 170000 10000 180000 495000 489700 220300 1385000 2019 141500 11500 153000 447100 489700 491200 1581000 Total assets 1. Use the financial statements above for Nittinan, Inc. and answer the following questions. (1) Find Nittinan's cash flow from assets for 2019 by finding its operating cash flows, net capital spending, change in net working capital. (i) What are the Nittinan's cash flow to creditors and cash flow to stockholders? Interpret the positive and negative signs of your results in (i) and (ii). 2. Use the financial statements above for Nittinan, Inc. and draw pro-forma statements for the year 2020. Sales are projected to grow by 11 percent. Costs of goods sold, depreciation expense, other expenses, current assets, and accounts payable increase spontaneously with sales (that is these items grow proportionally with growth in sales). Interest expense (amount) will remain constant. Dividend payout rate and the tax rate will remain constant. Calculate the full capacity sales if the firm is operating at 75% of its capacity and no new debt or equity is issued. What is the external financing needed to support the 11 percent growth rate in sales