Preparing Comparative Financial Statements is the most used technique for analyzing financial statements. This technique determines a business's profitability and financial position by comparing financial statements for two or more periods. The income statements and balance sheets are typically prepared comparatively for such an analysis.

Jenny Chang, a finance student at California Polytechnic State University, received an internship in the finance management training program with Smart Electric Parts Company.

Jenny was asked to prepare the company$$s financial statements and provide a comparative analysis. These statements primarily include income, balance sheets, and cash flow statements.

Financial information as of December $2022$ Financial information as of December $2023$

Cost of goods sold $$1,261,038$ Cost of goods sold $$1,592,143$

Cash $$182,187$ Cash $$272,478$

Depreciation $$355,810$ Depreciation $$402,170$

Interest expense $$53,211$ Interest expense $$55,098$

Selling & Administrative $$243,787$ Selling & Administrative $$323,352$

Accounts payable $$320,143$ Accounts payable $$361,404$

Net fixed assets $$1,569,750$ Net fixed assets $$1,912,500$

Sales $$2,472,590$ Sales $$3,012,392$

Accounts receivable $$121,887$ Accounts receivable $$161,717$

Current portion of Long$-$term debt $$146,510$ Current portion of Long$-$term debt $$209,703$

Long$-$term debt $$591,235$ Long$-$term debt $$612,195$

Equity in $12/312021570667$ Equity raised in $202345735$

Inventory $$27,119$ Inventory $$37,216$

Cost of Debt $9\%$ Cost of Debt $9\%$

Unlevered Cost of Equity $12\%$ Unlevered Cost of Equity $12\%$

Outstanding Shares $1,000,000$ Outstanding Shares $1,000,000$

Tax rate $35\%$ Tax rate $35\%$

Dividend percentage $25\%$ Dividend percentage $25\%$

$1.$ Prepare income and balance sheet statements for $2022$ and $2023.$

$2.$ Prepare cash flow from assets and cash flow to creditors and equity holders.

$3.$ What are the capital spending and changes in net working capital for $2023?$

$4.$ What is the DuPont Identity for $2022$ and $2023?$ Explain the firm$$s condition and performance changes, whether they indicate improvement, deterioration, or some combination.

$5.$ What are the internal and sustainable growth rates for $2022$ and $2023?$ Define and discuss the implication of these two growth rates in the company$$s long$-$term planning.

Part II

After submitting the financial statements, she was asked to provide a pro forma financial statement for $2024.$ Jenney remembered from her finance classes that she could set up the pro forma financial statement based on the percentage of sales method. Using the sustainable growth rate $2023,$ answer the following questions for Jenny?

a$.$ What are the pro forma financial statements for $2024?$

b$.$ What is the operating cash flow for $2024?$

c$.$ What is the free cash flow for $2024?$

d$.$ What is external financing needed $($EFN$),$ if any, for $2024?$

Part III

Using the sustainable growth rate of $2023($round up to no decimal$)$ and assuming the growth rate declines by $5\%$ per year to the long$-$term growth rate of $5\%$ in $2028,$ what are the free cash flows for $2024-2028?$

$$ What is the weighted average cost of capital if the company wants to maintain its total debt$-$to$-$equity ratio of $2024$ for the foreseeable future?

$$ What would be the enterprise value in early $2024?$

$$ What is the stock price in early $2024?$