Income Statement Revenue $1,785 Fixed costs 53 Variable costs (80% of revenue) 1,428 Depreciation 80 Interest (at 11.8%) 24 Taxes (at 40%) 80 $120 Net income Balance Sheet, Year-End 2016 2015 Assets: 400 Net working capital 340 008 $1,200 Fixed assets 680 $1,020 Total assets Liabilities: $ 240 $ 204 Debt Book equity 960 816 Total liabilities $1,200 $1,020 Sources and Uses Sources: Net income $120 Depreciation 80 oring 36 Stock issues 104 $340 Total sources Uses: Increase in net working capital 60 Investment 200 Dividends 80 Total uses $340 Principles of Corporate Finance |(12th Edition) Bookmark Show all steps: Chapter 29, Problem 27P ON Problem Long-term plans Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed assets. The company forecasts that the ratio of revenues to total assets at the start of each year will remain at 1.75. Fixed costs are expected to remain at $53, and variable costs at 80% of revenue. The company's policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20%. a. Construct a model for Executive Cheese like the one in Tables 29.9 to 29.11. b. Use your model to produce a set of financial statements for 2017 Income Statement Revenue $1,785 Fixed costs 53 Variable costs (80% of revenue) 1,428 Depreciation 80 Interest (at 11.8%) 24 Taxes (at 40%) 80 $120 Net income Balance Sheet, Year-End 2016 2015 Assets: 400 Net working capital 340 008 $1,200 Fixed assets 680 $1,020 Total assets Liabilities: $ 240 $ 204 Debt Book equity 960 816 Total liabilities $1,200 $1,020 Sources and Uses Sources: Net income $120 Depreciation 80 oring 36 Stock issues 104 $340 Total sources Uses: Increase in net working capital 60 Investment 200 Dividends 80 Total uses $340 Principles of Corporate Finance |(12th Edition) Bookmark Show all steps: Chapter 29, Problem 27P ON Problem Long-term plans Table 29.19 shows the 2016 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed assets. The company forecasts that the ratio of revenues to total assets at the start of each year will remain at 1.75. Fixed costs are expected to remain at $53, and variable costs at 80% of revenue. The company's policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 20%. a. Construct a model for Executive Cheese like the one in Tables 29.9 to 29.11. b. Use your model to produce a set of financial statements for 2017
