TABLE 2 Historical and Industry-Average Ratios 1988 2.5 30.1% 13.7% 1989 2.8 32.99 15.8% 1990 6.0 35.07 15.3% 1991 60 35.0% 15.45 Industry 1992 Average 60 3.3 35.1 0. 15.72 1645 Ants 428 TABLE 3 Historical 1992 and Projected Financial Statements (in Millions of Dollars) Percentage of sales 1992 1993 2nd Pass Projected 3rd Pass Slnet Cist and securities ceivable $ 2.18 7.10 2.46% 8.00 $ 2.62 X $ 262 X $ 2.62 X X X retines Current assets 8.43 $17.71 9.50 NA 10.12 X 10.12 10.12 X Norfuad assets Roles 26.63 $44.34 30.01 NA 31.96 $53.21 31.96 $53.21 31.96 S53.21 $ 0.84 0.95% counts payable X $1.01 X 1.23 1.39 Ketes payable X 1.48 fuff x x x x x Arund wages & taxes Content liabilities 0.90 $ 2.97 1.01 N.A. 1.08 1.08 X 1.08 $ 3.56 Lin-term debt Talabilities Cemon stock 12.57 $15.54 $17.49 11.31 $28.80 $44.34 Ruined camnings Toalcommon equity Tul lib& equity NA NA N.A N.A NA NA 12.57 $16.13 $17.49 15.41 $32.90 $49.04 13.40 $16.97 $20.83 15.20 $36.03 S$2.99 13.45 $17.01 $21.00 15.19 $36.19 $33.20 bermal funds needed (EFN) $ 0.01 X $ 4.17 $ 0.21 TABLE 1 Historical Financial Statements (in Millions of Dollars) 1991 1992 1990 1988 1989 Balance Sheets: Cash and securities Accounts receivable Inventories Current assets Net fixed assets Total assets $ 0.75 2.40 2.85 $ 6.00 9.00 $15.00 $ 1.05 3.36 3.99 5 8.40 12.60 $21.00 $ 1.36 4.37 5.19 $10.92 16,38 $27.30 $ 1.71 5.46 6.48 $13.65 20.48 $34.13 $ 2.18 7.10 8.43 $17.71 26.63 $44.34 Accounts payable Notes payable Accrued wages & taxes Current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities & equity $ 0.29 1.81 0.30 $ 2.40 2.11 $ 4.51 $10.55 (0.06) $10.49 $15.00 $ 0.40 2.18 0.42 $ 3.00 3.91 $ 6.91 $11.93 2.16 $14.09 $21.00 $ 0.53 0.75 0.54 $ 1.82 7.74 $9.56 $12.86 4.88 $17.74 $27.30 $ 0.65 0.94 0.69 $ 2.27 9.67 $11.94 $13.89 8.30 $22.19 $34.13 $ 0.84 1.23 0.90 $ 2.97 12.57 $15.54 $17.49 11.31 $28.80 $44.34 1988 1989 1990 1991 1992 Income Statements: Sales Cost of goods sold Depreciation Gross profit Interest expense Taxable income Taxes Net income Dividends Additions to R.E. $30.00 25.37 1.80 $ 2.83 0.44 $ 2.40 0.96 $ 1.44 0.00 $ 1.44 $42.00 35.08 2.52 $ 4.40 0.69 $ 3.71 1.49 $ 2.22 0.00 $ 2.22 $54.59 45.76 3.28 $ 5.55 1.01 $ 4.54 1.82 $ 2.72 0.00 $ 2.72 $68.25 57.21 4.10 $ 6.94 1.26 $ 5.68 2.28 5 3.42 0.00 $ 3.42 $88.73 74.25 5.33 $ 9.15 1.64 $ 7.51 3.00 $ 4.51 1.50 $ 3.01 Note: The figures in the tables were generated using a Lotus model; therefore some numbers may not add up properly because of rounding differences. TABLE 3 Continued Projected 3rd Pass 4th Pass Percentage of sales 1993 2nd Pass 1992 Income Statement: Sales Cost of goods sold EBIT Interest expense Taxable income Taxes Net income Dividends Additions to R.E. $88.73 79.58 $ 9.15 1.64 $ 7.51 3.00 $ 4.51 1.50 $ 3.01 100.00% $106.48 89.69 95.50 10.31% $ 10.98 N.A. X N.A. $ 9.34 N.A. 3.74 N.A. $ 5.60 N.A. 1.50 N.A. $ 4.10 SETEM 32 $106.48 95.50 $ 10.98 X $ 9.22 3.69 $ 5.53 1.64 $ 3.89 $106.48 95.50 $ 10.98 X $ 9.21 3.68 $ 5.53 1.65 $ 3.88 * ** ** *** 1992 4th Pass X X External funds needed (EFN) Assumed additional long-term debt Assumed additional stock Additional interest (ST and LT) Additional dividends Projected 2nd Pass 3rd Pass $ 0.21 $ 0.01 $ 0.04 $ 0.00 $ 0.17 $ 0.01 $ 0.01 $ 0.00 $ 0.01 $ 0.00 1993 $ 4.17 $ 0.83 $ 3.34 $ 0.12 $ 0.14 XXX Selected Ratios (Adjusted for Assumed Financing) Current 5.96 Profit margin 5.1% ROE 15.7% EPS $ 1.13 5.96 5.3% 15.3% $ 1.28 5.96 5.2% 15.3% $ 1.26 5.96 5.2% 15.3% $ 1.26 X X X X 4. Assume that you are now at the retreat, discussing the forecast with Space-Age senior executives. The vice president for manufacturing informs you that fixed assets were actually being operated at only 80 percent of capacity in 1992. What effect would this have on your projected external capital requirement for 1993? In answering this question, disregard any financing feedback effects and answer the question by modifying the 1st pass columns of Table 3, but explain how you could go on to reach a balanced solution. Also, in answering this and the next question, assume that depreciation expenses remain constant as a percent- age of sales. 6. a. Re-do Question 4 under the assumption that Space-Age was operating at 90 percent of capacity in 1992 b. Discuss the general relationship between capacity utilization and projected capital requirements in situations (a) where assets are "lumpy" and (b) where they are not lumpy. c. If you are using the Lotus model, set up a data table and then graph the relationship between EFN and 1992 capacity utilization. TABLE 2 Historical and Industry-Average Ratios 1988 2.5 30.1% 13.7% 1989 2.8 32.99 15.8% 1990 6.0 35.07 15.3% 1991 60 35.0% 15.45 Industry 1992 Average 60 3.3 35.1 0. 15.72 1645 Ants 428 TABLE 3 Historical 1992 and Projected Financial Statements (in Millions of Dollars) Percentage of sales 1992 1993 2nd Pass Projected 3rd Pass Slnet Cist and securities ceivable $ 2.18 7.10 2.46% 8.00 $ 2.62 X $ 262 X $ 2.62 X X X retines Current assets 8.43 $17.71 9.50 NA 10.12 X 10.12 10.12 X Norfuad assets Roles 26.63 $44.34 30.01 NA 31.96 $53.21 31.96 $53.21 31.96 S53.21 $ 0.84 0.95% counts payable X $1.01 X 1.23 1.39 Ketes payable X 1.48 fuff x x x x x Arund wages & taxes Content liabilities 0.90 $ 2.97 1.01 N.A. 1.08 1.08 X 1.08 $ 3.56 Lin-term debt Talabilities Cemon stock 12.57 $15.54 $17.49 11.31 $28.80 $44.34 Ruined camnings Toalcommon equity Tul lib& equity NA NA N.A N.A NA NA 12.57 $16.13 $17.49 15.41 $32.90 $49.04 13.40 $16.97 $20.83 15.20 $36.03 S$2.99 13.45 $17.01 $21.00 15.19 $36.19 $33.20 bermal funds needed (EFN) $ 0.01 X $ 4.17 $ 0.21 TABLE 1 Historical Financial Statements (in Millions of Dollars) 1991 1992 1990 1988 1989 Balance Sheets: Cash and securities Accounts receivable Inventories Current assets Net fixed assets Total assets $ 0.75 2.40 2.85 $ 6.00 9.00 $15.00 $ 1.05 3.36 3.99 5 8.40 12.60 $21.00 $ 1.36 4.37 5.19 $10.92 16,38 $27.30 $ 1.71 5.46 6.48 $13.65 20.48 $34.13 $ 2.18 7.10 8.43 $17.71 26.63 $44.34 Accounts payable Notes payable Accrued wages & taxes Current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities & equity $ 0.29 1.81 0.30 $ 2.40 2.11 $ 4.51 $10.55 (0.06) $10.49 $15.00 $ 0.40 2.18 0.42 $ 3.00 3.91 $ 6.91 $11.93 2.16 $14.09 $21.00 $ 0.53 0.75 0.54 $ 1.82 7.74 $9.56 $12.86 4.88 $17.74 $27.30 $ 0.65 0.94 0.69 $ 2.27 9.67 $11.94 $13.89 8.30 $22.19 $34.13 $ 0.84 1.23 0.90 $ 2.97 12.57 $15.54 $17.49 11.31 $28.80 $44.34 1988 1989 1990 1991 1992 Income Statements: Sales Cost of goods sold Depreciation Gross profit Interest expense Taxable income Taxes Net income Dividends Additions to R.E. $30.00 25.37 1.80 $ 2.83 0.44 $ 2.40 0.96 $ 1.44 0.00 $ 1.44 $42.00 35.08 2.52 $ 4.40 0.69 $ 3.71 1.49 $ 2.22 0.00 $ 2.22 $54.59 45.76 3.28 $ 5.55 1.01 $ 4.54 1.82 $ 2.72 0.00 $ 2.72 $68.25 57.21 4.10 $ 6.94 1.26 $ 5.68 2.28 5 3.42 0.00 $ 3.42 $88.73 74.25 5.33 $ 9.15 1.64 $ 7.51 3.00 $ 4.51 1.50 $ 3.01 Note: The figures in the tables were generated using a Lotus model; therefore some numbers may not add up properly because of rounding differences. TABLE 3 Continued Projected 3rd Pass 4th Pass Percentage of sales 1993 2nd Pass 1992 Income Statement: Sales Cost of goods sold EBIT Interest expense Taxable income Taxes Net income Dividends Additions to R.E. $88.73 79.58 $ 9.15 1.64 $ 7.51 3.00 $ 4.51 1.50 $ 3.01 100.00% $106.48 89.69 95.50 10.31% $ 10.98 N.A. X N.A. $ 9.34 N.A. 3.74 N.A. $ 5.60 N.A. 1.50 N.A. $ 4.10 SETEM 32 $106.48 95.50 $ 10.98 X $ 9.22 3.69 $ 5.53 1.64 $ 3.89 $106.48 95.50 $ 10.98 X $ 9.21 3.68 $ 5.53 1.65 $ 3.88 * ** ** *** 1992 4th Pass X X External funds needed (EFN) Assumed additional long-term debt Assumed additional stock Additional interest (ST and LT) Additional dividends Projected 2nd Pass 3rd Pass $ 0.21 $ 0.01 $ 0.04 $ 0.00 $ 0.17 $ 0.01 $ 0.01 $ 0.00 $ 0.01 $ 0.00 1993 $ 4.17 $ 0.83 $ 3.34 $ 0.12 $ 0.14 XXX Selected Ratios (Adjusted for Assumed Financing) Current 5.96 Profit margin 5.1% ROE 15.7% EPS $ 1.13 5.96 5.3% 15.3% $ 1.28 5.96 5.2% 15.3% $ 1.26 5.96 5.2% 15.3% $ 1.26 X X X X 4. Assume that you are now at the retreat, discussing the forecast with Space-Age senior executives. The vice president for manufacturing informs you that fixed assets were actually being operated at only 80 percent of capacity in 1992. What effect would this have on your projected external capital requirement for 1993? In answering this question, disregard any financing feedback effects and answer the question by modifying the 1st pass columns of Table 3, but explain how you could go on to reach a balanced solution. Also, in answering this and the next question, assume that depreciation expenses remain constant as a percent- age of sales. 6. a. Re-do Question 4 under the assumption that Space-Age was operating at 90 percent of capacity in 1992 b. Discuss the general relationship between capacity utilization and projected capital requirements in situations (a) where assets are "lumpy" and (b) where they are not lumpy. c. If you are using the Lotus model, set up a data table and then graph the relationship between EFN and 1992 capacity utilization