Discussion question- Need ASAP

 Discussion questions and draft are attached. Please confirm calculations and add some context 2 paragraphs) !!

Please refer to the hypothetical financial statements below.  Assume a constant profit margin and dividend payout ratio.  Also, assume that this firm’s assets and liabilities all vary proportionately with sales.  If sales are projected to increase by 10 percent, what is the external financing needed for the following year? Hint: In order to determine this amount, you must first construct a forecasted income statement.  What if sales are expected to increase by 20%?

 

2015

Income Statement

 

Sales

17300

Cost of goods sold

10600

Depreciation

3280

EBIT

3450

Interest 

680

EBT

2770

Tax

940

Net Income (EAT)

1830

Dividends

450

 

 

Balance Sheet

 

Assets

 

Current assets:

 

Cash and securities

350

Accounts receivable

940

Inventories

2360

Total current assets

3650

Net fixed assets

10850

Total assets

14500

 

 

Liabilities and owners’ equity

 

Current liabilities

 

Bank loan

0

Accounts payable

1920

Total current liabilities

1920

Long-term debt

3500

Common stock

7500

Retained earnings

1580

Total liabilities and owners’ equity

14500

Internal

Sheet1

15

% Additional

:

0

1730

Profit

37

39.00%

39.00%

31%

31%

680 680 Profit

5.4%tax rate

5.4%tax rate

450 450 450 Profit

39%

940 Added 10% to assets > 1034 Added 20% to assets > 1128

Added 10% to assets >

Added 20% to assets > 2832

Added 10% to assets >

Added 20% to assets >

10850 10850

0

730

1920

14500 14500 14500

																																																																																																																																																			Discussion I: Team Coffee Grind	2	0	2016 A	2016 B
Income Statement		%		Additional	2015			Profit
Sales		1	730	10%	19030	20%	3460	20760	6700	0.387	2832
Cost of goods sold			39.00%	10600	11659	12719	Profit Margin	38.7283236994
Depreciation			31%	3280	3614	6436
EBIT	3			450	3933	4448	2016 A:
Interest			680	7371	0.3873357856
EBT	2770	4613	5128		39%
Tax			5.4%tax rate		940		1034		1128
Net Income (EAT)	$183,380,000.00	1830	$221,870,770.00	2219	$264,046,440.00	2640	2016 B:
Dividends	8041	0.3873314066
Balance Sheet
Assets
Current assets:	Assumptions: Consistant profit margin, dividend payout ration, assets/liabilities all vary proportionately with sales
Cash and securities	350				Added 10% to assets >	385				Added 20% to assets >	420
Accounts receivable
Inventories	2360	2596
Total current assets	3650	4015	4380
Net fixed assets			10850
Total assets				14500	14865	15230
Liabilities and owners’ equity
Current liabilities
Bank loan	-365
Accounts payable		1920
Total current liabilities
Long-term debt	3500
Common stock	7500
Retained earnings	1580
Total liabilities and owners’ equity