Use the average of the two sales projections derived from the data below to find

Question

Use the average of the two sales projections derived from the data below to find the amount of new sales. PV, Avg historical percentage change. Year Sales 2011 1,500,000 2012 1,750,000 2013 2,100,000 2014 2,250,000 2015 2,250,000 2. Use the percentage of sales method to project the income statement and the balance sheet. 3. Assume the firm is at 100% capacity 4. Tax rate is 40% 5. COGS will be 80% of sales 6. Depreciation expense will be $80,000 in the next year 7. Dividends will be the same percentage of sales as in 2015 8. Interest expense for 2016 will be $50,000 9. Use NP or Cash to adjust figures so that the balance sheet balances

Explanation / Answer

Since it is mentioned that the firm is operating at a full capacity, there is no scope of increase in its revenue. So revenue in year 2016 will be $2,250,000

Income statement for year 2016 is as follows

Lets assume that the dividend payout ratio is 40%

So dividends paid = 40% * 192,000 = $76,800

So retained earnings = 192,000 - 76,800 = $115,200

balance Sheet will be as follows

Revenue       2,250,000.0 + COGS       1,800,000.0 - Gross Profit           450,000.0 = Decpreciation             80,000.0 - Interest             50,000.0 - PBT           320,000.0 = Tax           128,000.0 - Net Profit           192,000.0 =

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