The Big One-Volt Company makes really large one-volt batteries. Its highly simplified financial statements for 2019 and 2020 appear at the end of this assignment. The Big Volt guys are putting to use the Percentage of Sales Model, and are wondering what their various accounts would look like in 2023 if they manage to increase sales by 40% over 2020s sales.

a. What is the sales revenue target for 2023?

b. If all assets vary in direct proportion to sales, by what amount must they be increased to support the 2023 sales forecast?

c. As it turns out, PPE already nearly doubled from 2019 to 2020, in anticipation of future production increases. At the current moment PPE is grossly under-utilized; the plant is operating at only 70% of its capacity. Given this new information, how much PPE will need to be purchased to meet the 2023 sales target?

d. Given your answers to parts b and c, how much will total assets need to increase to support the planned expansion in sales?

e. What percent of Big One-Volts current financing is debt? (Round your answer to the nearest percent.)

f. No matter what your answer was to part d, assume that total assets are to increase by exactly $1,600. If the executive team at One-Volt wants to maintain the current debt ratio, how must the asset expansion be financed? Put another way, how much new debt must be issued and how much new equity must be issued?

g. What were dividends for 2020?

h. If the dividend policy is changed so that the payout ratio for 2020 is 50%, how will the asset expansion (of $1,600) be financed?

i.Consider again Big One-Volts 2020 financial statements (where the dividend payout ratio is 30% again). and Calculate Big One-Volts IGR

BIG ONE-VOLT CORPORATION 1 STATEMENT OF COMPREHENSIVE INCOME Revenues - COGS 2 Gross Profit - Operating Expenses 3 EBIT - Interest 4 EBT - Taxes 5 E (i.e., earnings, net income, profit) 2019 2020 6000 9000 (1800). (2700) 4200 6300 (1680) (2520) 2520 3780 (325) (1760) 2195 2020 549 505 1646 1515 2019 2020 2980 2230 22000 39550 24980 41780 STATEMENT OF FINANCIAL POSITION Assets Current 6 Non-current 7 Total Assets Liabilities Current Non-current Total Liabilities Equity Shareholder capitalization Retained Earnings 8 Total Equity 1750 1750 1500 15850 3250 17600 20578 23120 1152 1060 21730 24180 NOTES 1 all numbers are in thousands of dollars 2 30% of sales 3 40% of sales 4 interest on total debt is 10% per year 5 total corporate taxes are 25% 6 Current assets for 2020 include: cash=180, receivables =50, and inventory=2000 7 Comprised exclusively of PPE net of depreciation 8 the payout ratio is 30% BIG ONE-VOLT CORPORATION 1 STATEMENT OF COMPREHENSIVE INCOME Revenues - COGS 2 Gross Profit - Operating Expenses 3 EBIT - Interest 4 EBT - Taxes 5 E (i.e., earnings, net income, profit) 2019 2020 6000 9000 (1800). (2700) 4200 6300 (1680) (2520) 2520 3780 (325) (1760) 2195 2020 549 505 1646 1515 2019 2020 2980 2230 22000 39550 24980 41780 STATEMENT OF FINANCIAL POSITION Assets Current 6 Non-current 7 Total Assets Liabilities Current Non-current Total Liabilities Equity Shareholder capitalization Retained Earnings 8 Total Equity 1750 1750 1500 15850 3250 17600 20578 23120 1152 1060 21730 24180 NOTES 1 all numbers are in thousands of dollars 2 30% of sales 3 40% of sales 4 interest on total debt is 10% per year 5 total corporate taxes are 25% 6 Current assets for 2020 include: cash=180, receivables =50, and inventory=2000 7 Comprised exclusively of PPE net of depreciation 8 the payout ratio is 30%