|The projected sales for the forecast period is $165,000. Assume that the payout ratio will be maintained in the forecast period. The firm estimates that additional net fixed asset investment of $18,000 will be required during the forecast period. Assume that all current assets are spontaneous except Other Current Assets which is assumed not to change. Assume that all current liabilities except Notes Payable are spontaneous. A. Prepare the pro forma Balance Sheet and pro forma Income Statement. The EFR will be a plug number that makes the balance sheet balance like in the class example. B. Using the existing financial statements as your basis, estimate firm XYZs EFR for the forecast period again, but this time using the cookbook model. Assume that the profit margin remains the same in the forecast period. Also based on the cookbook equation, how much funding is expected to come from each of the internal sources of funds (change in SL and retained earnings). If firm XYZ must maintain a minimum current ratio of 1.8 and a maximum debt ratio of 0.50, how would you propose the EFR be financed (how much short term debt, long term debt, and equity)? C. Based on your results in part B, prepare a Pro Forma Sources and Uses of Funds Statement to reflect the financing allocations that you decided on in part B. The only format change required is to break the total EFR down into the amounts of short term debt, long term debt, and new equity. You will have to use the numbers for CA, SL, addition to R.E., and EFR that you calculated in part B to make it balance, since they may be slightly different than those from part A. Explain the basis for your financing allocations.

Sales Cost of Goods Sold Gross Profit Operating Expenses EBIT Interest Expense EBT Taxes @ 39% Net Income Dividend Addition to Retained Earnings

$140,000 117,000 23,000 12,830 10,170 4,610 5,560 2,168 3,392 1,018 $2,374

Current Assets Cash

Accounts Receivable Inventory Prepaid Items Other CA

Total Current Assets Net Plant & Equipment Total Assets

XYZ Company Balance Sheet 12/31/xxxx

Assets

$7,500 12,100 10,400

5,900

4,300 $40,200 82,300 $122,500

Current Liabilities Accounts Payable Wages Payable Notes Payable Taxes Payable

Total Current Liabilities Long Term Debt Total Liabilities

Common Stock Retained Earnings

Total Liabilities & Equity

XYZ Company Balance Sheet 12/31/xxxx

Liabilities & Equity

$7,200 3,600 5,400 4,200

$20,400 35,700 $56,100

28,700 37,700

$122,500