Actual YE: 2017 Forecast: 2018 510 500 Sales growth rate Costs Tax rate Dividend
ID: 2785986 • Letter: A
Question
Actual YE: 2017 Forecast: 2018 510 500 Sales growth rate Costs Tax rate Dividend Payout 925 so% 35% Actual YE: 2017 Actual YE: 2017 5200 780 910 3300 Acts Payable Notes Payable Accruals LT Debt Common Stock Retained Earnings Total uab & Equity 5730 Acts Receivable Inventories Net Fixed Assets 530 550 975 875 . ' $5,190 $$,190 Total Assets Elemental's fixed assets are at 100% capacity and current assets reflect desired levels for operators Forecast the sales, net income, and balance sheet using a percentage of sales approach to estimace a) Elemental's need for external funds (AFN) in 2018. EFN-5 Answer in words: What is the impact on AFN if the firm's COGS were at 80% rather than the historical level?Explanation / Answer
a) Forcasted sales = $10500 * (1 + 0.45)
= $15225
Forcasted Income statement
Sales = $15225
less: cost [$8925 * 145% / 100%] = 12941
EBIT = 2284
Less: Income tax = 685
Net income = $1599
Dividend [35% * 1599] = 560
Addition to retained earning [1599 - 560] = 1039
Balance sheet
Cash [200 * 145% / 100%] 290 Accounts payable[730 * 145% / 100%] 1059
Accounts receivable [780 * 145% / 100%] 1131 Notes payable 530
Inventories[910 * 145% / 100%] 1320 Accruals 550
Net fixed assets [3300 * 145% / 100%] 4785 LT Debt 975
Common stock 875
Retained earnings[1530 + 1039] 2569
7526 6558
EFN = Total Assets - Total liabilities and equity
= 7526 - 6558
= $968
b) COGS at 80%
Forcasted Income statement
Sales = $15225
less: cost [($10500*80%) * 145% / 100%] = 12180
EBIT = 3045
Less: Income tax = 914
Net income = $2131
Dividend [35% *2131 ] = 746
Addition to retained earning [2131 - 746] =1385
Balance sheet
Cash [200 * 145% / 100%] 290 Accounts payable[730 * 145% / 100%] 1059
Accounts receivable [780 * 145% / 100%] 1131 Notes payable 530
Inventories[910 * 145% / 100%] 1320 Accruals 550
Net fixed assets [3300 * 145% / 100%] 4785 LT Debt 975
Common stock 875
Retained earnings[1530 + 1385 ] 2915
7526 6904
EFN = Total Assets - Total liabilities and equity
= 7526 - 6904
= $622
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