1. PART I:

   Use the following information on Company Y and perform pro-forma financial modeling using a planned expansion method to answers the following questions. To do this assume that the percentage values with respect to sales of the 2020 (i) costs except depreciation, (ii) cash and equivalents, (iii) accounts receivable, (iv) inventories, and (v) accounts payable will remain fixed at their respective percentage values in 2019. Assume also that income tax will remain at 30% of the Pretax Income. Company Y sells a product for which in 2019 the total market size was of 500,000 units, of which Company Y owned a share of 20%. Both, the total market size and Company Y s market share are expected to grow at a 25% yearly rate for the next five years. The price of the product is $114 in 2019 and is expected to remain at that price for the next years.

   TABLE B.1	Market Analysis	2019	2020	2021	2022
   	Market Size	500,000	625,000	781,250	976,563
   	Market Share	20.000%	25.000%	31.250%	39.063%
   	Production Volume	100,000
   	Average Sales Price:	114
   	Sales

   In 2019, the outstanding debt of Company Y is $250,000, for which the company makes yearly interest payments of 8%. The executives of Company Y are considering making a significant capital investment in 2020 of $1,000,000 to purchase new machinery. The company plans to finance this investment with a 30-year loan that makes yearly interest payments equivalent to 8% of its principal. The principal is paid when the loan matures. The following table summarizes the debt and interest payment of Company Y.

   TABLE B.2	Debt and Interest Table	2019	2020	2021
   	Outstanding Debt	250,000	250,000	1,250,000
   	New Net Borrowing		1,000,000
   	Interest on Debt

   Currently, Company Y makes yearly expenditures on replacement capital investment of $25,000. If the company makes the planned expansion, it has been decided that it will continue making replacement capital investment of $25,000 until and including 2020; and starting in 2021 it will perform yearly expenditures on replacement capital investment of $70,000. The current and the planned expenditures on replacement of capital investment will be financed by the company s cash flow. The following table indicates for 2019 Company Y s values of i. opening book value, ii. capital investment, iii. depreciation, and iv. closing book value. The Table also indicates the 2020-2021 forecast values of capital depreciation if the planned expansion were to occur in 2020. Because no decision has yet been done about dividends, before making any balancing adjustments to the Balance Sheet, assume that these will be $0 in 2020.

   TABLE B.3	Fixed Assets & Capital Investment	2019	2020	2021
   	Opening Book Value	500,000
   	Capital Investment	25,000
   	Depreciation	-26,250	-76,188	-75,878
   	Closing Book Value	498,750

   The following table contains Company Y s income statement for 2019.

   TABLE B.4	Income Statement:	2019	2020
   	Sales	11,400,000
   	Costs except Depr.	-6,840,000
   	EBITDA	4,560,000
   	Depreciation	-26,250
   	EBIT	4,533,750
   	Interest Expense (net)	-20,000
   	Pretax Income	4,513,750
   	Income Tax	-1,354,125
   	Net Income	3,159,625

   The following table contains Company Y s balance sheet for 2019.

   TABLE B.5	Balance Sheet - Assets:	2019	2020
   	Assets
   	Cash and Equivalents	5,130,000
   	Accounts Receivable	5,700,000
   	Inventories	2,280,000
   	Total Current Assets	13,110,000
   	Property, Plant and Equipment	498,750
   	Total Assets	13,608,750
   	Balance Sheet - Liabilities and Equity:	2019	2020
   	Liabilities
   	Accounts Payable	1,140,000
   	Total Current Liabilities	1,140,000
   	Debt	250,000
   	Total Liabilities	1,390,000
   	Stockholders' Equity
   	Starting Stockholders' Equity	1,000,000
   	Net Income	3,159,625
   	Dividends	8,059,125
   	Stockholders' Equity	12,218,750
   	Total Liabilities and Equity	13,608,750

   What is the forecasted value of sales for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 2

1. "What is the forecasted value of Interest on Debt for 2020? Enter your answer as POSITIVE value (not as a negative value). Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 3

1. "What is the forecasted value of Capital Investment for 2020? Enter your answer as POSITIVE value (not as a negative value). Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 4

1. "What is the forecasted value of EBITDA for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 5

1. "What is the forecasted value of Net Income for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 6

1. "Before making additional balancing adjustments to the Balance Sheet, what is the forecasted value of Cash and Equivalents for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 7

1. "Before making additional balancing adjustments to the Balance Sheet, what is the forecasted value of Property, Plant and Equipment for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 8

1. "Before making additional balancing adjustments to the Balance Sheet, what is the forecasted value of Total Assets for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 9

1. "Before making additional balancing adjustments to the Balance Sheet, what is the forecasted value of Total Liabilities for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 10

1. "Before making additional balancing adjustments to the Balance Sheet, what is the forecasted value of Shareholder's Equity for 2020? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

10 points

QUESTION 11

1. "What is the estimate for Net New Financing for 2020? Note: Make sure you use the correct positive or negative sign. Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."