Use the following information on Company Y and perform pro-forma financial modeling using a planned expansion method to answers question (7)-(16). To do this assume that the percentage values with respect to sales of the (i) costs except depreciation, (ii) cash and equivalents, (iii) accounts receivable, (iv) inventories, and (v) accounts payable will stay fixed at the values corresponding for 2016.

Assume also that income tax will remain at 35% of the Pretax Income.

Consider Company Y. This firm sells a product for which in 2016 the total market size was of 5000000 units, of which Company Y owned a share of 12.5%.

Both, the total market size and Company Ys market share are expected to grow at a 4% yearly rate for the next five years.

The price of the product is $205 in 2016 and is expected to remain at that price for the next years.

Market Analysis	2016	2017	2018	2019
Market Size	5,000,000	5,200,000	5,408,000	5,624,320
Market Share	12.50%	13.00%	13.52%	14.06%
Production Volume	625,000
Sales Price:	$205.00	$205.00	$205.00	$205.00
Sales

In 2016, the outstanding debt of Company Y is $25000000, for which the company makes yearly interest payments of 8%. The executives of Company Y are considering making a significant capital investment in 2017 of $100000000 to purchase new machinery.

The company plans to finance this investment with a 30-year loan that makes yearly interest payments equivalent to 8% of its principal. The principal is paid when the loan matures.

The following table summarizes the debt and interest payment of Company Y.

Debt and Interest Table		2016	2017	2018
Outstanding Debt		25,000,000	25,000,000	125,000,000
New Net Borrowing			100,000,000
Interest on Debt

Currently, Company Y makes yearly expenditures on replacement capital investment of $7000000. If the company makes the planned expansion it is decided the company will perform yearly expenditures on replacement capital investment of $25000000. The current and the planned expenditures on replacement of capital investment will be financed by the companys cash flow.

The following table indicates for 2016 Company Ys values of i. opening book value, ii. capital investment, iii. depreciation, and iv. closing book value. The Table also indicates the 2017-2018 forecast values of capital depreciation if the planned expansion were to occur in 2017.

Fixed Assets & Capital Investment	2016	2017	2018
Opening Book Value	100,000,000
Capital Investment	7,000,000
Depreciation	(7,490,000)	(14,455,700)	(15,193,801)
Closing Book Value	99,510,000

The following table contains Company Ys income statement for 2016.

Income Statement:	2016	2017
Sales	128,125,000
Costs except Depr.	-89,687,500
EBITDA	38,437,500
Depreciation	-7,490,000
EBIT	30,947,500
Interest Expense (net)	-2,000,000
Pretax Income	28,947,500
Income Tax	-10,131,625
Net Income	18,815,875

The following table contains Company Ys balance sheet for 2016.

Balance Sheet
	2016	2017
Assets
Cash and Equivalents	38,437,500
Accounts Receivable	83,281,250
Inventories	17,937,500
Total Current Assets	139,656,250
Property Plant and Equipment	99,510,000
Total Assets	239,166,250
Liabilities and Equity
Accounts Payable	51,250,000
Total Current Liabilities	51,250,000
Debt	25,000,000
Total Liabilities	76,250,000
Stockholders' Equity
Starting Stockholders' Equity	9,500,000
Net Income	18,815,875
Dividends	134,600,375
Stockholders' Equity	162,916,250
Total Liabilities and Equity	239,166,250

A. What is the forecast value of sales for 2017?

B. What is the forecast value of debt interest payments for 2017?

C. 9. What is Company Y s forecast closing book value for 2017?

D. What is Company Y s forecast for costs except depreciation for 2017?

E. What is Company Y s forecast for net income for 2017?

F. What is Company Y s forecast for cash and equivalents for 2017?

G. What is Company Y s forecast for accounts receivable for 2017?

H. What is Company Y s forecast for property, plant and equipment for 2017?

I. Before making any adjustments to balance Total Assets with Total Liabilities and Equity, what is Company Y s forecast value of Total Liabilities and Equity for 2017?

J. What option can the financial managers of Corporation Y implement in order to balance Total Assets and Total Liabilities and Equity for 2017

CHOOSE BETWEEN THESE OPTIONS ...

>Increase the debt by the amount indicated in your calculations of net new financing

or

> Increase the dividends by the amount indicated in your calculations of net new financing;