Exhibit 3 Triple D CORPORATION Balance Sheets Assets 2017 2018 2019 Cash......... $20,000 $30,000 $20,000 Marketable securities. 30,000 35,000 50,000 Accounts receivable.. 150,000 230,000 330,000 Inventory.... 250,000 285,000 325,000 Total Current Assets... 450,000 580,000 725,000 Net Plant and equipment. 550.000 720.000 1.169.000 Total Assets...... $1,000,000 $1,300,000 $1,894,000 Liabilities & Equity Accounts payable. $100,000 $225,000 $200,000 Notes payable (bank). 100.000 100.000 300.000 Total Current liabilities. 200,000 325,000 500,000 Long-term liabilities.. 250.000 331.120 550.740 Total liabilities......... 450,000 656,120 1,050,740 Common stock ($10 par). 400,000 400,000 460,000 Capital paid in excess of par. 50,000 50,000 80,000 Retained earnings...... 100.000 193.880 303.260 Total stockholders' equity. 550.000 643.880 843.260 Total liabilities and stockholders' equity.. $1.000.000 $1.300.000 $1.894.000 The actual sales and purchases for Triple D Corporation for September and October 2019, along with its forecast sales and purchases for the period November 2019 through April 2020 are as follows. Question 3 (30 marks) (a) Determine the total cash receipts for each moth, November through April. (9 marks) (b) Determine the total cash payments for each moth, November through April. (9 marks) (c) Assuming that the firm has a cash balance of $22,000 at the beginning of November 2019, determine the end-of-month cash balances for each month, November through April. (9 marks) (d) Assuming that the firm wishes to maintain a $15,000 minimum cash balance, determine the monthly total financing requirements or excess cash balances. (3 marks) Triple D Corporation is all equity financed with total assets valued at $1 million, which are assumed constant. The corporation's ordinary shares are valued at $25 each, and the firm is in the 40 percent tax bracket. The corporation wishes to analyze five possible capital structures-0, 15, 30, 45, and 60 percent debt-equity ratios. Exhibit 1 shows the additional data which have been gathered for use in analyzing the five capital structures under consideration. Exhibit 1: Triple D Corporation's alternative capital structures Capital structure Interest rate on debt debt-equity ratio 0% 0.0% 15 8.0 30 10.0 45 13.0 60 17.0 The company's income statements for the previous three years are indicated in Exhibit 2. The balance Sheets for the same period are shown in Exhibit 3. Exhibit 2 TRIPLE D CORPORATION Income Statements 2017 Sales (all on credit) $1,500,000 Cost of goods sold.. 950.000 Gross profit.... 550,000 Selling and administrative expense. 380,000 Operating profit.. 170,000 Interest expense. 30.000 Net income before taxes 140,000 Taxes.. 46,120 Net Income $93,880 Shares 40.000 2018 $1,800,000 1,120,000 680,000 490,000 190,000 40.000 150,000 48.720 $101,280 40.000 2019 $2,160,000 1.300.000 860,000 590,000 270,000 85.000 185,000 64.850 $120,150 46.000 1 The firm makes 20 percent of all sales for cash and collects on 40 percent of its sales in each of the two months following the sale. Other cash inflows are expected to be $12,000 in September and April, $15,000 in January and March, and $27,000 in February. The firm pays cash for 10 percent of its purchases. It pays for 50 percent of its purchases in the following month and for 40 percent of its purchases two months later. 2 Wages and salaries amount to 20 percent of the preceding month's sales. Rent of $20,000 per month must be paid. Interest payments of $10,000 are due in January and April. A principal payment of $30,000 is also due in April. The firm expects to pay cash dividends of $20,000 in January and April. Taxes of $80,000 are due in April. The firm also intends to make a $25,000 cash purchase of fixed assets in December. Triple D Corporation is considering to bring out one of two games this season. The Signs Away game has a higher initial cost but also a higher expected return. Monopolistic Competition, the alternative, has a slightly lower initial cost but also lower expected return. The present values and probabilities associated with each game are listed in Exhibit 5: Exhibit 5: Triple D Corporation's investment choices Game Initial Investment Sign Away $140,000 Present value of Probabilities cash inflows 1.00 $320,000 0.30 220,000 0.50 -80,000 0.20 1.00 $120,000 Monopolistic Competition $260,000 200,000 -50,000 0.20 0.45 0.35 Exhibit 3 Triple D CORPORATION Balance Sheets Assets 2017 2018 2019 Cash......... $20,000 $30,000 $20,000 Marketable securities. 30,000 35,000 50,000 Accounts receivable.. 150,000 230,000 330,000 Inventory.... 250,000 285,000 325,000 Total Current Assets... 450,000 580,000 725,000 Net Plant and equipment. 550.000 720.000 1.169.000 Total Assets...... $1,000,000 $1,300,000 $1,894,000 Liabilities & Equity Accounts payable. $100,000 $225,000 $200,000 Notes payable (bank). 100.000 100.000 300.000 Total Current liabilities. 200,000 325,000 500,000 Long-term liabilities.. 250.000 331.120 550.740 Total liabilities......... 450,000 656,120 1,050,740 Common stock ($10 par). 400,000 400,000 460,000 Capital paid in excess of par. 50,000 50,000 80,000 Retained earnings...... 100.000 193.880 303.260 Total stockholders' equity. 550.000 643.880 843.260 Total liabilities and stockholders' equity.. $1.000.000 $1.300.000 $1.894.000 The actual sales and purchases for Triple D Corporation for September and October 2019, along with its forecast sales and purchases for the period November 2019 through April 2020 are as follows. Question 3 (30 marks) (a) Determine the total cash receipts for each moth, November through April. (9 marks) (b) Determine the total cash payments for each moth, November through April. (9 marks) (c) Assuming that the firm has a cash balance of $22,000 at the beginning of November 2019, determine the end-of-month cash balances for each month, November through April. (9 marks) (d) Assuming that the firm wishes to maintain a $15,000 minimum cash balance, determine the monthly total financing requirements or excess cash balances. (3 marks) Triple D Corporation is all equity financed with total assets valued at $1 million, which are assumed constant. The corporation's ordinary shares are valued at $25 each, and the firm is in the 40 percent tax bracket. The corporation wishes to analyze five possible capital structures-0, 15, 30, 45, and 60 percent debt-equity ratios. Exhibit 1 shows the additional data which have been gathered for use in analyzing the five capital structures under consideration. Exhibit 1: Triple D Corporation's alternative capital structures Capital structure Interest rate on debt debt-equity ratio 0% 0.0% 15 8.0 30 10.0 45 13.0 60 17.0 The company's income statements for the previous three years are indicated in Exhibit 2. The balance Sheets for the same period are shown in Exhibit 3. Exhibit 2 TRIPLE D CORPORATION Income Statements 2017 Sales (all on credit) $1,500,000 Cost of goods sold.. 950.000 Gross profit.... 550,000 Selling and administrative expense. 380,000 Operating profit.. 170,000 Interest expense. 30.000 Net income before taxes 140,000 Taxes.. 46,120 Net Income $93,880 Shares 40.000 2018 $1,800,000 1,120,000 680,000 490,000 190,000 40.000 150,000 48.720 $101,280 40.000 2019 $2,160,000 1.300.000 860,000 590,000 270,000 85.000 185,000 64.850 $120,150 46.000 1 The firm makes 20 percent of all sales for cash and collects on 40 percent of its sales in each of the two months following the sale. Other cash inflows are expected to be $12,000 in September and April, $15,000 in January and March, and $27,000 in February. The firm pays cash for 10 percent of its purchases. It pays for 50 percent of its purchases in the following month and for 40 percent of its purchases two months later. 2 Wages and salaries amount to 20 percent of the preceding month's sales. Rent of $20,000 per month must be paid. Interest payments of $10,000 are due in January and April. A principal payment of $30,000 is also due in April. The firm expects to pay cash dividends of $20,000 in January and April. Taxes of $80,000 are due in April. The firm also intends to make a $25,000 cash purchase of fixed assets in December. Triple D Corporation is considering to bring out one of two games this season. The Signs Away game has a higher initial cost but also a higher expected return. Monopolistic Competition, the alternative, has a slightly lower initial cost but also lower expected return. The present values and probabilities associated with each game are listed in Exhibit 5: Exhibit 5: Triple D Corporation's investment choices Game Initial Investment Sign Away $140,000 Present value of Probabilities cash inflows 1.00 $320,000 0.30 220,000 0.50 -80,000 0.20 1.00 $120,000 Monopolistic Competition $260,000 200,000 -50,000 0.20 0.45 0.35