Assignment 3
Assignment 3
Assignment 3
Income Statement:
Sales
Costs except Depr.
EBITDA
Depreciation
EBIT
Interest Expense (net)
Pretax Income
Income Tax
Net Income
200,000
(100,000)
100,000
(6,000)
94,000
(400)
93,600
(32,760)
60,840
ance Sheet
Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Inventories
Total Current Assets
Property Plant and Equipment
Total Assets
15,000
2,000
4,000
21,000
10,000
31,000
1,500
4,000
5,500
25,500
31,000
Q1
Jim's expects sales to grow by 10% next year. Using the percent of sales method, forecast:
Next year's forecasted sales:
a. Costs
b. Depreciation
$220,000
$110,000 50% of sales
$6,600 3% of sales
c. Net Income
d. Cash
e. Accounts Receivable
$2,200 1% of sales
f. Inventory
$4,400 2% of sales
$11,000 5% of sales
Q2
Assume that Jim's pays out 90% of its net income. Use the percent of sales method to forecast:
a. Stockholder's Equity
Last year's
Amount added
$25,500
$6,692
b. Accounts Payable
Q3
What is the amount of net new financing needed for Jim's?
Income Statement:
Sales
Costs except Depr.
EBITDA
Depreciation
EBIT
Interest Expense (net)
Pretax Income
Income Tax
220,000
-110,000
110,000
-6,600
103,400
-440
102,960
-36,036
Net Income
66,924
The net new financing needed for Jim's is actually negative they have excess cash that they can use to repay debt.
Forecasted amount
$32,192
Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Inventories
Total Current Assets
Property Plant and Equipment
Total Assets
16,500
2,200
4,400
23,100
11,000
34,100
1,650
4,000
5,650
32,192
37,842
(3,742)
(3,742)
Q4
Assume that KMS' market share will increase by 0.25% per year rather than the 1% used in the chapter (see Table 18.5)
and that its prices remain as in the chapter. What production capacity will KMS require each year? When will an
expansion become necessary (when will production volume exceed 1100)?
2013
2014
2015
2016
2017
Market Size
10,000
10,500
11,025
11,576
12,155
Market Share
10.00%
10.25%
10.50%
10.75%
11.00%
1,000
1,076
1,158
1,244
1,337
$74.89
$76.51
$78.04
$79.60
$81.19
Production Volume
Additional Market Information
Average Sales Price:
They will need to expand production capacity in 2015.
Q5
Under the assumption that KMS' market share will increase by 0.25% per year, you determine that the plant will require an
expansion in 2015. The expansion will cost $20 million. Assuming the financing of the expansion will be delayed
accordingly, calculate the projected interest payments (assuming that the KMS still uses a 10-year bond and interest rates
remain the same as in the chapter) through 2018.
2013
2014
2015
2016
2017
4,500
4,500
24,500
24,500
306
306
4,500
20,000
306
1,666
1,666
Q6
Under the assumption that KMS' market share will increase by 0.25% per year, you project the following depreciation:
2013
2014
2015
2016
2017
Depreciation
5,492
5,443
7,398
7,459
7,513
Using this information, project net income through 2018 (that is, reproduce Table 18.8 under the new assumptions).
2013
Income Statement ($000)
1 Sales
2 Cost of Goods Sold
3 EBITDA
4 Depreciation
5 EBIT
6 Interest Expense
7 Pretax Income
8 taxes (35%)
9 Net Income
2014
2015
2016
2017
74,890
82,344
90,341
99,056 108,555
(58,414) (64,228) (70,466) (77,264) (84,673)
16,476
18,116
19,875
21,792
23,882
(5,492) (5,443) (7,398) (7,459) (7,513)
10,984
12,673
12,477
14,333
16,369
(306)
(306)
(306) (1,666) (1,666)
10,678
12,367
12,171
12,667
14,703
(3,737) (4,328) (4,260) (4,434) (5,146)
6,941
8,038
7,911
8,234
9,557
sum of net income of 6 years
2018
12,763
11.25%
1,436
$82.82
2018
24,500
1,666
wing depreciation:
2018
7,561
assumptions).
2018
118,916
(92,755)
26,162
(7,561)
18,601
(1,666)
16,935
(5,927)
11,007
51,688