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 $15$th$,2020$

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 $$23,199,000$