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Please help to provide step by step guide to derive the answer Master Chemicals is planning its financing needs for the next 5 years. The
Please help to provide step by step guide to derive the answer
Master Chemicals is planning its financing needs for the next 5 years. The balance sheet for the year 2015 and 2016 and the income statement for the year 2016 are as shown below: 2016 2015 Net working capital 140 190 Fixed Assets: Gross Fixed Assets 350 Less accumulated depreciation 100 320 80 Net Fixed Assets 250 240 Total Net Assets 440 380 Long term debt 90 60 Net worth (Paid up capital plus retained earnings) 350 Long term Liabilities and Net Worth 440 320 2016 Revenues Costs 2200.00 380 2055.00 Depreciation 20.00 EBIT 125.00 Interest 5.00 Tax 60.00 Net Income 60.00 The manager has forecast the following: The sales are expected to increase by 20% every year for years 2017, 2018, 2019, 2020 and 2021 The costs will be 92% of the revenue Depreciation will be 9% of net fixed assets at start of the year Dividend will be 60% of net income Net working capital will be 11% of revenues Investment in net fixed assets will be 12.5% of revenues Tax rate is 50% All additional capital needed will be financed through debt Interest will be charged at 10% of long term debt at the beginning of the year Question 1 . (a) Prepare the Pro forma income statement for years 2017 to 2021. . (b) Estimate the additional financing required for each of the 5 years. . (c) Prepare the Pro forma balance sheet for years 2017 to 2021Step by Step Solution
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