Financial information on AAA Ltd. is shown below.

AAA Ltd. Income Statement

For the Year Ended December 31st,

2019

2018

Sales

4,215,750

3,850,000

Cost Of Goods Sold

2,178,700

2,016,320

Other Expenses

1,005,200

986,500

Depreciation

9,800

8,550

Earnings Before Interest and Taxes

1,022,050

838,630

Interest Expense

56,735

46,870

Earnings Before Taxes

965,315

791,760

Taxes (30%)

289,595

237,528

Net Income

$ 675,721

$ 554,232

AAA Ltd. Balance Sheet

As at December 31st,

ASSETS

2019

2018

Cash & Equivalent

50,750

23,180

Short-term investments

202,834

186,014

Inventories

1,458,841

1,355,047

Accounts Receivable

218,500

131,221

Total Current Assets

1,930,925

1,695,462

Prop, Plant & Equip - Net

2,154,301

1,940,594

Total Assets

$ 4,085,226

$ 3,636,056

LIABILITIES & EQUITY

Accounts Payable

267,566

258,151

Notes Payable

82,823

62,310

Accruals

58,559

31,210

Short-term Debt

314,469

317,416

Total Current Liabilities

723,417

669,087

Long-Term Debt

833,547

844,139

Total Liabilities

1,556,964

1,513,226

Common Share Capital

650,000

650,000

Retained Earnings

1,878,263

1,472,830

Total Equity

2,528,263

2,122,830

Total Liabilities and Equity

$ 4,085,226

$ 3,636,056

Answer the following questions (a-e). [Please note: short-term investments are non-operating current assets; notes payable and short-term debt are non-operating current liabilities.]

a)What is Operating Cash Flow for 2019?

b)What is Free Cash Flow for 2019?

c)The stock is traded at $30 per share at the end of 2019 and there are 100,000 shares outstanding. What is MVA during 2019?

d)Given the firm's WACC is 10%, what is EVA during 2019?

In addition to the AAA Ltd. financial statements, you are given more information as follows:

Sales are forecast to increase by 10% in 2020.

Notes Payable, short-term Debt, Long-term Debt, and Common Share Capital will not change. Net Plant and Equipment is forecasted to be $2,500,000 next year. Short-term investments are expected to be $250,000.

In 2020, the company's dividend payout ratio will be 40%.

In 2020, cost of goods sold is expected to be 50% of sales. Other expenses will be 25% of sales. Depreciation expense in 2020 is expected to be $11,000.

Cash is expected to be 1% of sales, and inventories will be 40% of sales. Accounts receivable will be 4% of sales. Accounts payable will be 4% of sales. Accruals will be 1% of sales.

The company is expected to pay 6% per year compounded annually on its short-term debt and 8% per year compounded annually on its long-term debt. The interest expense on the short-term debt in 2020 is calculated as interest rate on short-term debt * amount of short-term debt outstanding at the end of 2019. The interest expense on the long-term debt is calculated as interest rate on long-term debt * amount of long-term debt outstanding at the end of 2019.

The company's tax rate is 30%.

Based on the information provided you are to:

e)Complete the pro-forma income statement and balance sheet for 2020.

f)Calculate the amount of Additional Funds Needed in 2020.