QUESTION 1 Use the following Income Statement and Balance Sheet of firm X to ans
ID: 2795122 • Letter: Q
Question
QUESTION 1
Use the following Income Statement and Balance Sheet of firm X to answers Questions (1) & (2)
Income Statement, 2016
Balance Sheet, 2016
Sales
5,000,000
Assets
Costs except Depr.
-3,500,000
Cash and Equivalents
1,096,000
EBITDA
1,500,000
Accounts Receivable
960,000
Depreciation
-10,900
Inventories
90,000
EBIT
1,489,100
Total Current Assets
2,146,000
Interest Expense (net)
-100,500
Property Plant & Equipment
2,190,000
Pretax Income
1,388,600
Total Assets
4,336,000
Income Tax
-486,010
Liabilities &Equity
Net Income
902,590
Accounts Payable
900,000
Debt
950,000
Total Liabilities
1,850,000
Stockholders' Equity
2,486,000
Total Liabilities and Equity
4,336,000
Sales in 2017 are expected to grow at a rate of 9% with respect to the values of 2016. Assume the company pays out 55% of its net income.
1. Use the percent sales method to forecast the value of next year s stockholder s equity for firm X.
2. Use the percent sales to estimate the firm s net new financing for firm X.
Income Statement, 2016
Balance Sheet, 2016
Sales
5,000,000
Assets
Costs except Depr.
-3,500,000
Cash and Equivalents
1,096,000
EBITDA
1,500,000
Accounts Receivable
960,000
Depreciation
-10,900
Inventories
90,000
EBIT
1,489,100
Total Current Assets
2,146,000
Interest Expense (net)
-100,500
Property Plant & Equipment
2,190,000
Pretax Income
1,388,600
Total Assets
4,336,000
Income Tax
-486,010
Liabilities &Equity
Net Income
902,590
Accounts Payable
900,000
Debt
950,000
Total Liabilities
1,850,000
Stockholders' Equity
2,486,000
Total Liabilities and Equity
4,336,000
Explanation / Answer
1.) Forcasted income statement
Forecast the value of next year s stockholder's equity = Beginning Stockholders' Equity at 2016 + Addition to Retained Earnings
= $2,486,000 + $445653
= $2931653
2.) Forcasted Balance Sheet
Assets
Cash and Equivalents [1,096,000 * 1.09] 1194640
Accounts Receivable [960,000 * 1.09] 1046400
Inventories [90,000 * 1.09] 98100
Total Current Assets 2339140
Property Plant & Equipment [2,190,000 *1.09] 2387100
Total Assets $4726240
Liabilities & Equity
Accounts Payable [900,000 * 1.09] 981000
Debt 950,000
Total Liabilities $1931000
Stockholders' Equity $2931653
Total Liabilities and Equity $4862653
Net new financing for firm X = Total Assets - Total Liabilities and Equity
= $4726240 - $4862653
= ($136413)
Sales (5,000,000 * [1 + 0.09]) 5450000 less: Costs except Depr. (3,500,000* [1 + 0.09]) 3815000 EBITDA (1,500,000* [1 + 0.09]) 1635000 less: Depreciation (10,900) EBIT 1624100 less: Interest Expense (net) 100,500 Pretax Income 1523600 less: Income Tax @35% 533260 Net Income $990340 Dividend (55% of net income) $544687 Addition to Retained Earnings (45% of net income) $445653Related Questions
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