2013 Proj 2014 Current Assets Cash $ 20 Accounts Receivable $ 240 Inventory $ 24

Question

2013 Proj 2014 Current Assets                          Cash $         20     Accounts Receivable $       240     Inventory $       240     Total Current Assets $       500     Net Plant & Equipment $       500     Total Assets $    1,000     Liabilities & Owners Equity Accounts Payable $       100     Notes Payable $       100     Total Current Liabilities $       200     Long Term Debt $       100     Total Liabilities $       300     Common Stock $       500     Retained Earnings $       200     Total Stockholders' Equity $       700     Total Liabilities, Equity $    1,000     Income Statement           Sales $    2,000     COGS $    1,200     Gross profit $       800     Selling and Admin Expense $       700     EBIT $       100     Interest Expense $         10 $               20 EBT $         90     Taxes @ 40% $         36     Net Income $         54     Common Dividend $      21.6     Addition to Retained Earnings $         32     1) 30% TWO PARTS: A) Using the above data and the AFN equation, compute the additional funds needed for 2014 if sales growth is expected to be 25% and the firm is operating at 100% capacity. B) Use the forecasted financial statements approach to compute additional funds needed if we assume all additional funds will be financed equally with notes payable and long-term debt. Assume "dividend payout ratio" in 2014 is the same ratio with 2013. 2013 Proj 2014 Current Assets                          Cash $         20     Accounts Receivable $       240     Inventory $       240     Total Current Assets $       500     Net Plant & Equipment $       500     Total Assets $    1,000     Liabilities & Owners Equity Accounts Payable $       100     Notes Payable $       100     Total Current Liabilities $       200     Long Term Debt $       100     Total Liabilities $       300     Common Stock $       500     Retained Earnings $       200     Total Stockholders' Equity $       700     Total Liabilities, Equity $    1,000     Income Statement           Sales $    2,000     COGS $    1,200     Gross profit $       800     Selling and Admin Expense $       700     EBIT $       100     Interest Expense $         10 $               20 EBT $         90     Taxes @ 40% $         36     Net Income $         54     Common Dividend $      21.6     Addition to Retained Earnings $         32     1) 30% TWO PARTS: A) Using the above data and the AFN equation, compute the additional funds needed for 2014 if sales growth is expected to be 25% and the firm is operating at 100% capacity. B) Use the forecasted financial statements approach to compute additional funds needed if we assume all additional funds will be financed equally with notes payable and long-term debt. Assume "dividend payout ratio" in 2014 is the same ratio with 2013.

Explanation / Answer

Fund Requirement=$95.00

2013 Proj 2014 Current Assets                          Cash $20 $61.40 Accounts Receivable $240 $300.00 Inventory $240 $300.00 Total Current Assets $500 $661.40 Net Plant & Equipment $500 $500 Total Assets $1,000 $1,161.40 Liabilities & Owners Equity Accounts Payable $100 $125.00 Notes Payable $100 $147.50 Total Current Liabilities $200 $          272.50 Long Term Debt $100 $147.50 Total Liabilities $300 $420 Common Stock $500 $          500.00 Retained Earnings $200 $241.40 Total Stockholders' Equity $700 $741.40 Total Liabilities, Equity $1,000 $1,161.40 Income Statement            Sales $2,000 $2,500.00 COGS 1,200.00 $1,500.00 Gross profit 800.00 $1,000.00 Selling and Admin Expense 700.00 $875.00 EBIT 100.00 $125.00 Interest Expense 10.00 $20 EBT 90.00 $105.00 Taxes @ 40% 36.00 $42.00 Net Income 54.00 $63.00 Common Dividend $21.60 $21.60 Addition to Retained Earnings $32 $41.40

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