FIN 300 Lecture Notes - Lecture 3: Pro Forma, Cash Flow
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Exercises #2-#5 â The most recent financial statements forBradley, Inc. are shown below (assuming no income taxes) seeattachment.
Income Statement | Balance Sheet | |||||||||
Sales | 6,500 | Assets | 17,400 | Debt | 8,400 | |||||
Costs | 5,320 | Equity | 9,000 | |||||||
NI | 1,180 | Total | 17,400 | Total | 17,400 | |||||
Assets and costs are proportional to sales. Debt and equity arenot. No dividends are paid. Next yearâs sales are projected to be$7,280. Construct the pro forma statements and answer the followingquestions based on the pro-formas: | |||||||||
Exercise #2â Net Income = $ | 0 | ||||||||
Exercise #3â Total Assets = $ | 0 | ||||||||
Exercise #4â Equity = $ | 0 | ||||||||
Exercise #5â The External Financing Needed = $ |
Executive Fruitâs financial manager believes that sales in 2015 could rise by as much as 20% or by as little as 5%. Assets and costs change in proportion to sales, debt remains constant, and no new equity financing occurs. |
a. | Recalculate the first-stage pro forma financial statements under these two growth assumptions and calculate the required external financing (All figures are in thousands). (Enter your answers in thousands.) |
Base Case | 20% Growth | 5% Growth | ||||
INCOME STATEMENT | ||||||
Revenue | $ | 7,000 | $ | $ | ||
Cost of goods sold | 6,300 | |||||
EBIT | $ | 700 | $ | $ | ||
Interest | 140 | |||||
Earnings before taxes | $ | 560 | $ | $ | ||
State and federal tax | 224 | |||||
Net income | $ | 336 | $ | $ | ||
Dividends | 224 | |||||
Retained earnings | $ | 112 | $ | $ | ||
BALANCE SHEET | ||||||
Assets | ||||||
Net working capital | $ | 700 | $ | $ | ||
Fixed assets | 2,800 | |||||
Total assets | $ | 3,500 | $ | $ | ||
Liabilities and shareholders' equity | ||||||
Long-term debt | $ | 1,400 | $ | $ | ||
Shareholders' equity | 2,100 | |||||
Total liabilities and shareholders' equity | $ | 3,500 | $ | $ | ||
Required external financing | $ | $ | ||||
b. | Assume any required external funds will be raised by issuing long-term debt and that any surplus funds will be used to retire such debt. Prepare the completed (second-stage) pro forma balance sheet. (Enter your answers in thousands.) |
BALANCE SHEET | ||||||
Base Case | 20% Growth | 5% Growth | ||||
Assets | ||||||
Net working capital | $ | 700 | $ | $ | ||
Fixed assets | 2,800 | |||||
Total assets | $ | 3,500 | $ | $ | ||
Liabilities and shareholders' equity | ||||||
Long-term debt | $ | 1,400 | $ | $ | ||
Shareholders' equity | 2,100 | |||||
Total liabilities and shareholders' equity | $ | 3,500 | $ | $ | ||
Consider the following recent financials for XYZCorporation:
Income Statement | Balance Sheet | ||||
Sales | 73,802 | Assets | 209,087 | Debt | 38,278 |
Costs | 44,281 | Equity | 170,809 | ||
EBIT | 29,521 | ||||
Taxes @ 38% | 11,218 | Total | 209,087 | Total | 209,087 |
Net Income | 18,303 |
Assets and costs are proportional to sales. Debt and equity arenot. A dividend of $2,907 was paid, and the company wishes tomaintain a constant payout ratio. Next yearâs sales are projectedto grow by 25%.
What is the pro-forma value for equity? (Round answer to 2decimal places. Do not round intermediate calculations).
What is the external financing needed using the pro-formaapproach? (Round answer to 2 decimal places. Do not roundintermediate calculations).