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Develop Performa Income statement and balance sheet based on these data and balance sheet Las Vegas Sands Memorandum To: You, Financial Analyst From: Patricia Montgomery,

Develop Performa Income statement and balance sheet based on these data and balance sheet
Las Vegas Sands
Memorandum
To: You, Financial Analyst
From: Patricia Montgomery, Vice President of Finance
CC: Kenneth Kay, Chief Financial Officer
Date: March 15th,2020
Subject: Financing the Construction of the Venetian Suite Tower
Hotel room occupancy rates in our Venetian tower are consistently exceeding 90%. Unfortunately, our property constrains our options. So, we are exploring the option of replacing one of our existing 1,014 room towers with a new 1,600 room tower. We are estimating the cost of construction at around $6,400 million in combined demolition, lost revenue, and construction costs. The plan is to being construction immediately. Construction would take two years. Once the new suites are operational, we forecast the following increases:
Year Occupancy Rate Net Revenue Increase
00%0%
110%6%
260%36%
370%42%
480%48%
585%51%
670%42%
740%24%
As the smallest expansion, this planned addition would likely require complete remodeling after 7 years. At the beginning of year 8, we can probably salvage $400 million in equipment, but that figure is far less than its expected book value.
If we proceed with this expansion, we need to be careful about maintaining our operations over the next two years. Please create a pro-forma income statement and balance sheet for the next two years and estimate any additional funds needed for this expansion.
Additional assumptions:
Assume any salvage, depreciation, lost revenue, and tax effects of the demolition of the former tower are included in the construction cost.
Revenue increases are relative to this year, before construction, not relative to the previous year.+
We expect no new fixed administrative costs associated with the additional rooms.
As real estate, the new suites will fall into the 30-year depreciation class. We utilize straight-line depreciation so our annual deprecation will increase by $213 million. Please do not account for this change until after the new tower is completed in the second year.
Treat current maturities of long-term debt as if it were notes payable.
The cost of the new suites will be spread over two years. Construction will commence immediately and require a 60% outlay of $3840 million. The remaining 40%, or $2560 million, will be paid in the following year.
Dividends will continue to be paid at the same rate as last year.
As required by Nevada gaming laws, we need to keep substantial cash on hand, at least enough to cover all of our accrued customer liabilities. Maintain a minimum cash balance of at least $4 billion at all times.
Note that because of our significant cash holdings, we accrue more interest than we pay. Thus, our net interest expense is negative (an income).
Assume momentarily that any necessary loans needed to balance cash flows will be in the form of revolving short-term debt.
Note that accounts receivable, net equals accounts receivable, gross less allowance for doubtful accounts
Assets
Current assets
Cash & cash equivalents $4,242,000
Accounts receivables, gross 1,126,000
Less: allowance for doubtful accounts 282,000
Accounts receivable, net 844,000
Inventories 37,000
Prepaid expenses & other current assets 182,000
Total current assets 5,305,000
Property & equipment, gross 24,859,000
Less: accumulated depreciation & amortization 10,015,000
Property & equipment, net 14,844,000
Other assets, net 3,050,000
Total assets $23,199,000
Liabilities
Current liabilities
Accounts payable $483,000
Accrued expenses 2,396,000
Income taxes payable 275,000
Current maturities of long-term debt 70,000
Total current liabilities 3,224,000
Other long-term liabilities 1,046,000
Long-term debt 12,422,000
Total liabilities 16,692,000
Equity
Common stock 1,000
Capital in excess of par value 6,566,000
Treasury stock (4,481,000)
Retained earnings (accumulated deficit)3,101,000
Total Las Vegas Sands Corp. stockholders' equity (deficit)5,187,000
Noncontrolling interests 1,320,000
Total equity (deficit)6,507,000
Total liabilities and equity $23,hh199,000

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