Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

URGENT Please help!! Need the answer for only Question 2. The BG Sign Company has completed the following projections for a forecast to be based

image text in transcribed

URGENT Please help!! Need the answer for only Question 2.

The BG Sign Company has completed the following projections for a forecast to be based on its 2020 financial statements. Please prepare the items requested below for this project 1. Complete a 5-year financial forecast for the company consisting of pro-forma income statements, balance sheets and Additional Funds Needed. You may assume the following: . . . Revenues will grow at rate of 25% per year over the 5-year forecast period. Cost of Goods Sold and G&A Expenses will maintain their current percentage of sales during the forecast period. Taxes can be calculated at a rate of 33%, and the dividend payout ratio will be maintained at 45%. The following balance sheet items can be forecasted as a percentage of sales: Cash, Accounts Receivable, Inventory, Pre-paid Expenses, Net Fixed Assets, Accounts Payable and Accrued Taxes and Wages. Notes Payable are assumed to remain constant at current levels and Long-Term Debt can be forecasted as 75% of Net Fixed Assets. You may further assume an interest rate of 8% on both the Notes Payable and the Long Term Debt. Assume any External Funding Needed will be in the form of additional Common Equity contributions by the owners of the business. 2. Using the above assumptions, determine the maximum average growth rate over the 5 year forecast period that would result in the owners NOT having to contribute any additional capital. That is, find the sustainable growth rate. (Hint: you may want to find the growth rate in each year of the forecast period, then take the average to determine the average sustainable growth.) The BG Sign Company has completed the following projections for a forecast to be based on its 2020 financial statements. Please prepare the items requested below for this project 1. Complete a 5-year financial forecast for the company consisting of pro-forma income statements, balance sheets and Additional Funds Needed. You may assume the following: . . . Revenues will grow at rate of 25% per year over the 5-year forecast period. Cost of Goods Sold and G&A Expenses will maintain their current percentage of sales during the forecast period. Taxes can be calculated at a rate of 33%, and the dividend payout ratio will be maintained at 45%. The following balance sheet items can be forecasted as a percentage of sales: Cash, Accounts Receivable, Inventory, Pre-paid Expenses, Net Fixed Assets, Accounts Payable and Accrued Taxes and Wages. Notes Payable are assumed to remain constant at current levels and Long-Term Debt can be forecasted as 75% of Net Fixed Assets. You may further assume an interest rate of 8% on both the Notes Payable and the Long Term Debt. Assume any External Funding Needed will be in the form of additional Common Equity contributions by the owners of the business. 2. Using the above assumptions, determine the maximum average growth rate over the 5 year forecast period that would result in the owners NOT having to contribute any additional capital. That is, find the sustainable growth rate. (Hint: you may want to find the growth rate in each year of the forecast period, then take the average to determine the average sustainable growth.)

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

Students also viewed these Accounting questions