The management of Coker Corp. is doing a quick forecast of 20X9 using the modifi

Question

The management of Coker Corp. is doing a quick forecast of 20X9 using the modified percentage of sales method in preparation for a more detailed planning exercise later in the month. The estimate is to assume a 9% growth in sales. All other line items are to be assumed to grow at the same rate except for fixed assets which is projected to increase by $95,000 due to an expansion program already underway. Approximate financial statements for the current year, 20X8, and a planning worksheet are shown below. The firm pays 9% interest on all of its debt. Assume the tax rate is a flat 20%. There are no plans for dividends or the sale of additional stock next year. Make a forecast of Coker's complete income statement and balance sheet. Enter your answers in thousands. For example, an answer of $12 thousands should be entered as 12, not 12,000. (Hints: The easiest way to grow a number by 9% is to multiply it by 1.09 rather than taking 9% and adding. Do not grow subtotals. For example, to grow Revenue and COGS by 9%, round each to the nearest thousand and subtract for Gross Margin. Don't grow interest, debt, or equity; use the debt/interest iteration technique.) Round your answers to the nearest whole thousand. Enter all amounts as a positive numbers.

Current and Projected Income Statements
($000)

Current and Projected Balance Sheets
($000)

ASSETS

LIABILITIES & EQUITY

Coker Corp.

Current and Projected Income Statements
($000)

20X8 20X9 Revenue 687 COGS 299 Gross Margin 388 Expenses 222 EBIT 166 Interest (9%) 35 EBT 131 Income Tax (20%) 26 Net Income 105 Coker Corp.

Current and Projected Balance Sheets
($000)

ASSETS

20X8 20X9 C/A 172 F/A 519 Total 691

LIABILITIES & EQUITY

20X8 20X9 C/L 89 Debt 383 Equity 219 Total 691

Explanation / Answer

We can conclude as follows

Projections for income statement

Balance sheet can be summarised as follows

We have asssumed that fixed asset has been bought on cash

Because of rise in activity Current assets will increase by 15000 (from 172 to 187) ( before payment of F.A.)

and Current Liabilities will increase by 8000 (increase from 89 to 97)

i.e. there must be increase in working capital to substitute this change of 15000 -8000,= 7000

assuming it has been raised as short term debt , we have added 7000 to current liabilities

Particulars value in 20x 8 Multiplying factor value in 20x9 Revenue 681 1.09 749 Less: COGS 299 1.09 326 Gross Margin 388 -- 423 Less: Expenses 222 1.09 242 EBIT 166 -- 181 Interest 35 -- 35 EBT 131 -- 146 income tax 20% 26 -- 29 Net income 105 -- 117

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

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