2024 – Balance Sheet 12 31 2013 Cash 180 000 00 Receivables 360 000 00 Inventory 720 000 00 Total Current Assets 1 260 000 00 Net Fixed Assets 1 440 000 00 Total

 

Balance Sheet
	12/31/2013
Cash	180,000.00
Receivables	360,000.00
Inventory	720,000.00
Total Current Assets	1,260,000.00
Net Fixed Assets	1,440,000.00
Total Assets	2,700,000.00
Accounts Payable	360,000.00
Line of Credit
Notes Payable	156,000.00
Accruals	180,000.00
Total Current Liabilities	696,000.00
Common Stock	1,800,000.00
Retained Earnings	204,000.00
Total Liabilities & Equity	2,700,000.00

 

 

Income Statement
	12/31/2013
Sales	3,600,000.00
Operating Costs	3,279,720.00
EBIT	320,280.00
Interest	18,280.00
EBT	302,000.00
Taxes (.40)	120,800.00
Net Income	181,200.00
Dividends	108,000.00
Additions to Ret. Earn.	73,200.00
DPS	1.08
No. Common Shares	100,000.00
Additional Notes Payable	na
Add. Interest Expense	na
Additional Common Stock	na
Additional Shares	na
Additional Dividends	na

Any required new external funding is taken on at the beginning of the next year (2014) in the problem. Assume that there are 120,000 shares of common stock outstanding. Next year, the firm will pay dividends as specified in your particular variant. This new dividend per share must be paid on all shares outstanding next year. In this case we are not using a constant payout ratio, but rather are describing the dividend policy on a dividend per share basis. This means the payout ratio may change in the forecasted year.  

 

Rework problem 12-9 with the assumption that the firm’s sales will grow at a rate of 16% during the next year. Any new external funding required would be raised 60% from the sale of new common stock and 40% from taking on additional short-term debt (Line of Credit). The sale of any new shares would net the company $30 per share. All existing shares (existing and newly issued) will receive a dividend per share of $1.20. All existing debt will carry an interest rate of 6.5% in the forecast. Any new debt (if needed) would have an interest rate of 5.5%. In the event that the firm has excess funding under this plan, the excess funding should be used to repurchase shares of stock at $30. Due to an updated inventory management system, Inventory is expected to increase at a rate only half that of the increase in sales.  

 

THE ANSWER TO PROBLEM 12-9 IS ATTACHED BUT THE EXCEL SPREADSHEET WILL NEED TO BE MODIFIED TO THE ASSUMPTIONS GIVEN ABOVE.