QUESTION 1

1. Use the following information on Company Y and perform pro-forma financial modeling using a planned expansion method to answer the following questions. Assume that the percentage values, with respect to sales, of the (i) costs except depreciation, (ii) cash and equivalents, (iii) accounts receivable, (iv) inventories, and (v) accounts payable will stay fixed at the values corresponding for 2019. Assume that costs except depreciation in 2019 is $135000000 and that income tax will remain fixed at 35% of the Pretax Income.

   Company Y sells a product for which in 2019 the total market size was of 5000000 units, of which Company Y owned a share of 9%. The total market size is expected to grow at a 8% rate. Company Ys market share is expected to remain at 9%. The price of the product is $1000 in 2019 and is expected to evolve according to the values listed in the following Table.

   Market Analysis	2019	2020	2021	2022
   Market Size	5,000,000	5,400,000	5,832,000	6,298,560
   Market Share	9.00%	9.00%	9.00%	9.00%
   Production Volume	450,000	486,000	524,880	566,870
   Average Sales Price:	$1,000.00	$1,080.00	$1,166.40	$1,259.71
   Sales

   In 2019, the outstanding debt of Company Y is $2000000, for which the company makes yearly interest payments of 5%. The executives of Company Y are considering making a significant capital investment in 2020 of $4000000 to purchase new machinery and be able to satisfy forecasted future market demand. The company plans to finance this investment with a 20-year loan that makes yearly interest payments equivalent to 5% of its principal. The principal is paid when the loan matures.

   The following table summarizes the debt and interest payment of Company Y.

   Debt and Interest Table		2019	2020	2021
   Outstanding Debt		2,000,000
   New Net Borrowing
   Interest on Debt

   Currently, Company Y makes yearly expenditures on replacement capital investment of $210000. If the company makes the planned expansion it is considering, then - starting in 2021- the total yearly expenditures on replacement capital investment will be $490000. The current and the planned expenditures on replacement of capital investment will be financed by the companys cash flow. The following table contains for 2019 Company Ys 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.
   Fixed Assets & Capital Investment	2019	2020	2021
   Opening Book Value	3,000,000
   Capital Investment	210,000
   Depreciation	(288,900)	(641,799)	(628,137)
   Closing Book Value	2,921,100

   The following table contains Company Ys income statement for 2019.

   Income Statement:	2019	2020
   Sales	450,000,000
   Costs except Depr.	-135,000,000
   EBITDA	315,000,000
   Depreciation	-288,900
   EBIT	314,711,100
   Interest Expense (net)	-100,000
   Pretax Income	314,611,100
   Income Tax	-110,113,885
   Net Income	204,497,215

   The following table contains Company Ys balance sheet for 2019.

   Balance Sheet
   	2019	2020
   Assets
   Cash and Equivalents	135,000,000
   Accounts Receivable	90,000,000
   Inventories	67,500,000
   Total Current Assets	292,500,000
   Property Plant and Equipment	2,921,100
   Total Assets	295,421,100
   Liabilities and Equity
   Accounts Payable	126,000,000
   Total Current Liabilities	126,000,000
   Debt	2,000,000
   Total Liabilities	128,000,000
   Stockholders' Equity
   Starting Stockholders' Equity	9,500,000
   Net Income	204,497,215
   Dividends	-46,576,115
   Stockholders' Equity	167,421,100
   Total Liabilities and Equity	295,421,100

   1 What is the forecast value of sales for 2021?

QUESTION 2

What is the forecast value of debt interest payments for 2021?

QUESTION 3

What is Company Y s forecast closing book value for 2021?

QUESTION 4

What is Company Y s forecast for costs except depreciation for 2020? Note: Express as a positive value.

QUESTION 5

What is Company Y s forecast for net income for 2020?

QUESTION 6

What is Company Y s forecast for cash and equivalents for 2020?

QUESTION 7

What is Company Y s forecast for accounts receivable for 2020?

QUESTION 8

What is Company Y s forecast for property, plant and equipment for 2020?"

QUESTION 9

Before making any adjustments to balance Total Assets with Total Liabilities and Equity, what is Company Y s forecast value of Total Liabilities and Equity for 2020?"

QUESTION 10

According to the 2020 forecasts for Company Y, is there needs for new financing or excess cash? Specify the value of new financing needed (express with a positive sign) or excess cash available (express with a negative sign). Answer in strictly numerical terms."