is the Managing Director of a very successful software publishing company. He now wants to diversify into a new area of business, Financial Services, and approaches you for advice. A copy of his Statement of Financial Position for the past two years is produced below:

Statement of Financial Position as at 31 December

Non-current Assets 2020 2019

000s 000s

Tangible assets 250,000 200,000

Less depreciation to date 85,000 60,000

165,000 140,000

Current Assets

Inventory 7,000 8,000

Receivables 30,000 30,000

Bank 10,000

37,000 48,000

Less Current Liabilities

Payables - 20,000

Bank Overdraft 24,000

24,000 20,000

Net Current Assets 13,000 28,000

Net Assets 178,000 168,000

Capital and Reserves

Issued Share Capital 150,000 150,000

Reserves 28,000 18,000

178,000 168,000

expects current sales to continue at 30 million per month. He will continue to give one months credit on sales. The expected gross margin on these sales will be 20% and general overheads (excluding depreciation) are expected to be 3 million per month, payable as expensed. There is not expected to be any material difference in the working capital requirements (inventory) for the existing turnover. The tangible assets are depreciated on a straight-line basis over ten years.

On the 1^st January 2021, Sugar will issue at par, 50 million, 2% fixed interest bonds, redeemable 2029, in order to finance his new project. There is expected to be a 100% take up of the bonds. The issue will be to finance an investment of a further 45 million in tangible non-current assets and a further investment of 5 million in working capital (inventory).

The new project is expected to increase revenue initially, by a further 6 million per month but will also increase overheads by a further 4 million per month. There will be no credit given on these cash flows.

Ignore tax and dividends.

thinks the new contract is good news for the company and will help to provide the company with good profitability and a healthy cash position.

Required:

Prepare an analysis showing his companys forecasted cash position, Income Statement and Statement of Financial Position for the year ending 31 December 2021.