The Soxman Corporation, a plastics molding company, had the following year- end results: Soxman Corporation Sales Costs Taxable income (IBT) Taxes Net income 70,600,000 60,716,000 9,884,000 2.075,640 7,808 360 86.0% of Sales 14.0% of Sales 21% Tax Rate Dividends Addition to retained earnings 3,856 800 3,951,560 $ $ Current assets Net fixed assets 12,500,000 19,200,000 Short-term debt Long-term debt 6,400,000 7,800,000 $ Common stock Accumulated retained earnings Total equity Total L&E 3,200,000 14,300,000 17,500,000 31.700,000 Total assets 31.700.000 $ $ For next year, Soxman is making the following planning assumptions: Revenue growth: 8.5% IBT Margin: 1 percentage point higher than current year Tax Rate: Unchanged at 21% Dividends: Same dollar amount as current year (no change) Current Assets: Increase 2 percentage points faster than the sales growth rate Net Fixed Assets: $2.9 million net increase Long-Term Debt: Repay $1.0 million Repurchase $1.9 million in common shares (a reduction in "Common Stock") Questions: a. What amount of Short-term Debt will be needed in Box 1 to make this plan possible? (You will need to make a pro forma forecast of the table above to answer this question.) b. Your Bank informs you that your Short-Term Borrowing facility is now limited to $7.3 million. To comply with this cap, you decide to defer the purchase of a fifth injection molding center and thus cut the capital spending plan by $800,000 to a $2,100,000 net increase (instead of $2,900,000 increase); and you also decide to reduce the sales growth forecast. All the other parameters set out in Part (A) continue to apply. What is the new growth rate in sales in Box 2 (percentage to one decimal point, like x.x%) that you can support with the credit constraint? Soxman Corporation Sales Costs Taxable income (IBT) Taxes Net income Dividends Addition to retained earnings Current assets Net fixed assets 70,600,000 60,716,000 86.0% of Sales 9,884,000 14.0% of Sales 2,075,640 21% Tax Rate 7,808,360 3,856,800 3,951,560 12,500,000 Short-term debt $ 6,400,000 19,200,000 Long-term debt 7,800,000 Common stock $ 3,200,000 Accumulated retained earnings 14,300,000 Total equity $ 17,500,000 31,700,000 Total L&E $ 31,700,000 $ Total assets Output area: Part A Changes Soxman Corporation Sales Costs Taxable income (IBT) Taxes Net income Dividends Addition to retained earnings 8.5% growth 85.0% of Sales 15.0% of Sales 21% Tax Rate Box 1 Current assets Net fixed assets Short-term debt Long-term debt Common stock Accumulated retained earnings Total equity $ Total L&E $ Changes Total assets Part B Soxman Corporation Box 2 growth 85.0% of Sales 15.0% of Sales 21% Tax Rate Sales Costs Taxable income (IBT) Taxes Net income Dividends Addition to retained earnings Current assets Net fixed assets Memo: $7.3 milli Short-term debt Long-term debt Common stock Accumulated retained earnings Total equity Total L&E $ $ Total assets $
