Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

These are your financial statements for the year ending today: BALANCE SHEET Cash $ 340,000 Accounts Payable $ 2,720,000 Receivables 4,200,000 Accruals 980,000 Inventories 4,960,000

image text in transcribed
These are your financial statements for the year ending today: BALANCE SHEET Cash $ 340,000 Accounts Payable $ 2,720,000 Receivables 4,200,000 Accruals 980,000 Inventories 4,960,000 Notes Payable 1.300,000 Total Current Assets $ 9,500,000 Total Current Liabilities $ 5,000,000 Net Fixed Assets 2,500,000 Long-term Debt 2,000,000 Common Stock 3,800,000 Retained Earnings 1,200,000 Total Assets $12,000,000 Total Liabilities and Equity $12,000,000 INCOME STATEMENT Sales Less: Operating costs EBIT Less: Interest EBT Less: Taxes (40%) Net Income Less: Dividends Additions to Retained Earnings $36,500,000 29,200,000 $ 7,300,000 500,000 $ 6,800,000 2,720,000 $ 4,080,000 3,500,000 $ 580,000 You expect sales to increase 40% next year. Assume you are currently operating at 75% capacity Interest expense next year will be 15% of any interest-bearing debt balance at the beginning of the year Dividends will increase by 50% next year Operating costs are 60% fixed and 40% variable Days Sales Outstanding are expected to decrease by 5 days next year Days Payables Outstanding are expected to decrease by 4 days next year Cash will vary with sales . Using a pro forma income statement to estimate the additions to retained earnings, how much external funds do you project needing to support the 40% sales growth? If the additional funds were raised using long-term debt, immediately, how would that affect your additional funds estimate? Project your income statement and balance sheet under both scenarios: first estimate and second estimate

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Management Systems Audit Risk Mitigation

Authors: Mr Indulis L Svikis

1st Edition

B084DGQJJ5, 979-8607031909

More Books

Students also viewed these Accounting questions