Building Financial Models
Not what you're looking for?
Can someone assist me with this problem. I am having trouble with a & b.
16. Building Financial Models. The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (that is, assets net of depreciation) by $200,000 per year for the next 5years and forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 10 percent of net fixed assets at the end of the year. Fixed costs are expected to remain at $56,000 and variable costs at 80 percent of revenue. The company's policy is to pay out two-thirds of net income as dividends and to maintain a book debt ratio of 25 percent of total
capital.
a. Produce a set of financial statements for 2007. Assume that net working capital will equal 50 percent of fixed assets.
b. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2007. What is the projected debt ratio for 2007?
INCOME STATEMENT, 2006
(figures in thousands of dollars)
Revenue $1,800
Fixed costs 56
Variable costs (80% of revenue) 1,440
Depreciation 80
Interest (8% of beginning-of-year debt) 24
Taxable income 200
Taxes (at 40%) 80
Net income $120
Dividends $80
Retained earnings $40
BALANCE SHEET, YEAR-END
(figures in thousands of dollars)
2006
Assets
Net working capital $400
Fixed assets 800
Total assets $1,200
Liabilities and shareholders' equity
Debt $300
Equity 900
Total liabilities and
shareholders' equity $1,200
Purchase this Solution
Solution Summary
Excel file contains a set of financial statements and pro forma balance sheet.
Purchase this Solution
Free BrainMass Quizzes
Six Sigma for Process Improvement
A high level understanding of Six Sigma and what it is all about. This just gives you a glimpse of Six Sigma which entails more in-depth knowledge of processes and techniques.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.
Learning Lean
This quiz will help you understand the basic concepts of Lean.