Forecasting Financial Statements Common stock price $75.00 $2.40 Eamings per share2021 Dividends per share 2021 $1.44 Growth rate of sales 12% 100,000 Common stock outstanding2021 Operating costs/sales ratio 2021 91.5% Total liabilities-to-assets ration 35% Proportion of short-term interest-bearing debt2021 40% Tax rate 25% Cofor-tax cost of debt 13.50% a. Constructing the forecasted financial statements (Parts II., III., and IV.) Part II. Income Statements 2021 $6,400,000.00 Sales 6,041,500.00 Operating costs including depreciation Eamings before interest and taxes (EBIT) Interest $358,500.00 38,500.00 $320,000.00 Eamings before taxes (EBT) Taxes 80,000.00 Net income (NI) $240,000.00 Dividends Addition to retained eamings Part III. Balance Sheets 2021 Assets Cash $320,000.00 Receivables 640,000.00 Inventories 1,280,000.00 Total current assets. $2,240,000.00 Fixed assets 2,560,000.00 Total assets $4,800,000.00 Liabilities and Equity Accounts payable $640,000.00 Accrued liabilities 320,000.00 Notes payable 95,000.00 Total current liabilities $1,055,000.00 Long-term debt 180,000.00 Total liabilities $1,235,000.00 Common stock 3,200,000.00 Retained eamings 365,000.00 Total common equity $3,565,000.00 Total liabilities and equity $4,800,000.00 Part V. Notes on Calculations Total liabilities Less: Payables and accruals Interest-bearing debt 2022 2022 Allocated to notes payable Allocated to long-term bonds Interest expense Target equity-to-assets ratio Required total equity Retained eamings Required common stock b. Calculating the growth rate in sales at which the additional financing requirements will be exactly Profit margin 3.75% Dividend payout ratio 60% Formulas Addition to retained earings2021 #N/A #N/A Growth rate in sales Forecasting Financial Statements Common stock price $75.00 $2.40 Eamings per share2021 Dividends per share 2021 $1.44 Growth rate of sales 12% 100,000 Common stock outstanding2021 Operating costs/sales ratio 2021 91.5% Total liabilities-to-assets ration 35% Proportion of short-term interest-bearing debt2021 40% Tax rate 25% Cofor-tax cost of debt 13.50% a. Constructing the forecasted financial statements (Parts II., III., and IV.) Part II. Income Statements 2021 $6,400,000.00 Sales 6,041,500.00 Operating costs including depreciation Eamings before interest and taxes (EBIT) Interest $358,500.00 38,500.00 $320,000.00 Eamings before taxes (EBT) Taxes 80,000.00 Net income (NI) $240,000.00 Dividends Addition to retained eamings Part III. Balance Sheets 2021 Assets Cash $320,000.00 Receivables 640,000.00 Inventories 1,280,000.00 Total current assets. $2,240,000.00 Fixed assets 2,560,000.00 Total assets $4,800,000.00 Liabilities and Equity Accounts payable $640,000.00 Accrued liabilities 320,000.00 Notes payable 95,000.00 Total current liabilities $1,055,000.00 Long-term debt 180,000.00 Total liabilities $1,235,000.00 Common stock 3,200,000.00 Retained eamings 365,000.00 Total common equity $3,565,000.00 Total liabilities and equity $4,800,000.00 Part V. Notes on Calculations Total liabilities Less: Payables and accruals Interest-bearing debt 2022 2022 Allocated to notes payable Allocated to long-term bonds Interest expense Target equity-to-assets ratio Required total equity Retained eamings Required common stock b. Calculating the growth rate in sales at which the additional financing requirements will be exactly Profit margin 3.75% Dividend payout ratio 60% Formulas Addition to retained earings2021 #N/A #N/A Growth rate in sales
