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Zapatera Enterprises is evaluating its financing requirements for the coming yea

ID: 2744458 • Letter: Z

Question

Zapatera Enterprises is evaluating its financing requirements for the coming year. The firm has only been in business for one year, but its CFO predicts that the firm's operating expenses, current assets, net fixed assets, and current liabilities will remain at their current proportion of sales. Last year Zapatera had $12.97 million in sales with net income of $1.19 million. The firm anticipates that next year's sales will reach $14.56 million with net income rising to $2.15million. Given its present high rate of growth, the firm retains all of its earnings to help defray the cost of new investments. The firm's balance sheet for the year just ended is as follows

Zapatera Enterprises, Inc.

Balance Sheet

12/31/13

% of Sales

Current assets

2,900,000

22.359 %

Net fixed assets

6,500,000

50.116 %

Total

9 ,400,000

Liabilities and Owners' Equity

Accounts payable

3,200,000

24.672%

Long-term debt

1,900,000

NA Superscript aNAa

Total liabilities

5,100,000

Common stock

1 ,000,000

NA Superscript aNAa

Paid-in capital

1 ,800,000

NA Superscript aNAa

Retained earnings

1 ,500,000

Common equity

4 ,300,000

Total

9 ,400,000

Estimate Zapatera's total financing requirements (total assets) and its net funding requirements (discretionary financing needed) for 2014.

Note: Use the percentage of sales given in Zapatera Enterprises' balance sheet for 2013.

Hint: Make sure to round all intermediate calculations to at least five decimal places

The 2014 retained earnings are $ ?

Zapatera Enterprises, Inc.

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Balance Sheet

12/31/13

% of Sales

Current assets

2,900,000

22.359 %

Net fixed assets

6,500,000

50.116 %

Total

9 ,400,000

Liabilities and Owners' Equity

Accounts payable

3,200,000

24.672%

Long-term debt

1,900,000

NA Superscript aNAa

Total liabilities

5,100,000

Common stock

1 ,000,000

NA Superscript aNAa

Paid-in capital

1 ,800,000

NA Superscript aNAa

Retained earnings

1 ,500,000

Common equity

4 ,300,000

Total

9 ,400,000

Estimate Zapatera's total financing requirements (total assets) and its net funding requirements (discretionary financing needed) for 2014.

Note: Use the percentage of sales given in Zapatera Enterprises' balance sheet for 2013.

Hint: Make sure to round all intermediate calculations to at least five decimal places

The 2014 retained earnings are $ ?

Explanation / Answer

Zapatera Enterprises, Inc Balance Sheet 31-12-2014 % of Sales Remarks Assets Current assets 32,55,470 22.359% ($ 14.56 million X 22.359%) Net fixed assets 72,96,890 50.116% ($ 14.56 million X 50.116%) Total $ 1,05,52,360 Liabilities and Owners' Equity Accounts payable 35,92,243 24.672% ($ 14.56 million X 24.672%) Long-term debt 19,00,000 NA Total liabilities 54,92,243 Common stock 10,00,000 NA Paid-in capital 18,00,000 NA Retained earnings 22,60,117 Balncing Figure. Common equity 50,60,117 Total $ 1,05,52,360 Note: The above amounts Arrived based on 2014 Sales i.e. $ 14.56 million and Retained Earnings is balancing figure.