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QUESTION 4 (16 marks) (35 minutes) The nancial statements for Firestone Inc. (are provided below). Although the company has not been growing, it now plans to expand and will increase net xed assets by $200,000 per year at the end of the next 5 years. Firestone forecasts that the ratio of Revenues to total assets will remain at 1.5 Net working capital will equal 50% of the end of year net xed assets Annual depreciation is 10% of net xed assets at the start of the year Fixed Costs are expected to remain at $75,000 and variable costs at 80% of revenue. The company's policy is to pay out 2/3 of its net income as dividends Maintain a Debt Ratio of 25% of total assets (eg $1,500 x 25% = $375 Debt) Revenues are expected to increase by 20% in 2021 REQUIRED: i) Prepare a Pro-forma Income Statement and Balance Sheet for 2021. (12 marks) ii) Now assume that the balancing item is debt and that no equity is to be issued. Prepare the Liabilities and Equity portion of the Pro-forma Balance Sheet for 2021. What is the projected debt ratio for 2021? (4 marks) ii) Now aSSume that the balancing item is debt and that no equity is to be issued. Prepare the Liabilities and Equity portion of the Pro-forma Balance Sheet for 2021. What is the projected debt ratio for 2021? (4 marks) Firestone Inc. Income Statement for year-ended December 31, 2020 (5000's) Revenue $2,250 Fixed Costs 75 Variable Costs (80% of revenue) 1,800 Depreciation 100 Interest (8% of begin yr. debt) 30 Taxable income 245 Taxes @ 40% 98 Net income $ 147 Dividends 98 Addition to retained earnings 49 Balance Sheet As at Dec 8], HBO m Net working capital $ 500 Net xed assets 1,000 net of depreciation) Total assets $1,500 Liabilities and shareholder's equity Debt \".3 375 Shareholder's Equity 1,125 Total Liabilities and shareholder's Equity $1,500 4