A. Prepare a 2016 financial forecast for Comtech. All operating costs, asset acc

Question

A. Prepare a 2016 financial forecast for Comtech. All operating costs, asset accounts, and current liabilities vary directly with sales. The interest expense, tax rate and dividend payout ratio will remain constant. How much additional debt is required if no new equity is raised and sales are projected to increase by 15% in 2016? Note: Comtech’s 2015 Dividend = $4,500

B. If Comtech decides to maintain a constant debt-equity ratio, what rate of growth can it maintain assuming that no additional equity financing is available?

C. If Comtech does not want to incur any additional financing (debt or equity), but attempts to balance the Balance Sheet by reducing their Accounts Receivable, how may A/R Days do they need to reduce in order to get the Balance Sheet to balance?

   2015 Income Statement Revenue 120,000 Cost of Goods Sold 82,500 Depreciation 9,250 EBIT 28,250 Interest Expense 3,500 Taxable Income 24,750 Taxes 5,130 Net Income 19,620 balance sheet asset 2015 cash 20,000 A/R 18,000 Inventory 32,240 current asset 70,240 Net PP&E 140,360 Total assets 210,600 liability A/P 63,350 additional debt L-T debt 40,800 Total liability 104,150 S/E common stock & R/E 106,450 total liability and S/E 210,600

Explanation / Answer

FINANCIAL FORECAST

INCOME STATEMENT

revenue                                              138000           (120000 +15%)

less: COGS                                        94875                (68.75% of sales

                                                           43125

less: depreciation                               10640                 (7.71% of sales)

EBIT                                                  32845

less interest                                      3500 ( constant)

taxable inconme                              28985

less taxes                                         6006                     (20.72% of taxable income)

less dividend                                   5271 (note: last yrs divdend payout ratio= 4500/19620*100= 22.94%                                                                 SO 22.94% of 22979= 5271

retained earnings                            17708        

BALANCE SHEET

ASSETS SIDE

cash                                                   22991(16.66% of sales)

A/R                                                     20700(15% of sale

inventory                                            37081(26.87% of sales)               

TOTAL CURRENT ASSETS              80772

net P P & E                                        161419 (116.97% of sales)

total assets                                       242191

LIABILITIES SIDE

A/P                                                    72850 ( 52.79% of sales)

common stock & retained earnings 124158 ( 106450 + retained earnings of 17708)

balancing figure( Long term debt        15183

total                                                         242191

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.