Part C

The balance sheet and income statement or CeeCo are in Exhibit C.

Prepare a common size balance sheet and income statement for CeeCo.

Include the common size statements in your spreadsheet file.

3a) How much cash does CeeCo have on hand relative to total assets?

b) What proportion of CeeCos assets has the firm financed using short term debt?

c) What percent of CeeCos revenues does the firm have left over after paying all of its expenses including taxes?

d) What is the relative importance of Ceecos major expense categories?

Prepare a 2012 pro forma income statement, balance sheet, and free cash flow for CeeCo using the following assumptions:

Revenue will grow 20%.

COGS will increase from 67% to 68%. All other expenses will remain at the current percentage levels except interest expense which will remain at its current dollar level.

Cash will remain at $500. The remaining working capital accounts will increase in proportion to the revenue growth.

Net plant, property and equipment will increase in proportion to the increase in revenue.

No cash dividends are paid. Any financing will be done via short term debt.

e) What is the net income for 2012?

f) What is the FCF for 2012?

g) What is the year end value of all assets?

h) How much additional short term debt was added in 2012?

i) What is the sustainable growth rate for CeeCo for 2012 (using 2011 net income) based on working capital only?

j) What is the sustainable growth rate for CeeCo for 2012 (using 2011 retained earnings) based on all assets?

Exhibit C
		2011
Balance Sheet
Cash and marketable securities		$500
Accounts receivable		$6,000
Inventories		$9,500
	Current assets	$16,000
Net property, plant, and equipment		$17,000
	Total assets	$33,000
Accounts payable		$7,200
Short term debt		$6,800
	Total current liabilities	$14,000
Long term debt		$7,000
	Total liabilities	$21,000
	Total owners equity	$12,000
	Total liabilities and owners equity	$33,000
Income Statement
Revenues		$30,000
Cost of goods sold		-$20,000
	Gross profit	$10,000
Operating expense		-$8,000
	Net operating income	$2,000
Interest expense		-$900
	Earnings before taxes	$1,100
Income taxes		-$400
	Net income	$700