Chapter 12: Financial Planning and Forecasting Financial Statements Baldwin Prod

Question

Chapter 12: Financial Planning and Forecasting Financial Statements

Baldwin Products Company anticipates reaching a sales increasing by 10% next year. The company expects expenses as a percentage of sales to be the same as last year. During the past several years, the company has been paying $50,000 in dividends to its stockholders and the company expects to continue this policy for at least the next year. Assume that the firm is operating at full capacity. The actual balance sheet and income statement for Baldwin during 2010 follow:

Baldwin Product Company
Balance Sheet as of December 31, 2010
Actual
Cash $200,000
Accounts Receivable 400,000
Inventories 1,200,000
Fixed assets, net 500,000
Total assets $2,300,000

Accounts payable $600,000
Notes payable 500,000
Long-term debt 200,000
Stockholders' equity 1,000,000
Total liabilities and equity $2,300,000



Income Statement-Year Ending December 31, 2010
Sales $4,000,000
Expenses, including interest and taxes $3,700,000
Earnings after taxes $300,000

3. What is Baldwin’s AFN if the firm was operating at 80% capacity?

Explanation / Answer

a.$ 500000 b.$ 128767

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