Question

Assume that sales will grow at 5.00%. The following accounts (cash, accounts receivable, inventory, net fixed assets, accounts payable and accruals, as well as operating costs) are assumed to change with sales and will maintain their current percentage of sales rates into 2016. The dividend payout ratio will remain the same. Long-term debt and notes payable will remain constant into 2016 as will interest expense, as a result. The firm also does not plan to issue any additional common stock or conduct any share repurchases. The firm’s tax rate is 40%. Any additional funds needed will be sourced through a line-of-credit (LOC) and surpluses will be paid out through a special dividend.

	2015
Sales	$1,480.00
Operating Costs:	$1,270.00
EBIT	$210.00
Interest	$35.00
Earnings Before Taxes	$175.00
Taxes (40%)	$70.00
Net Income	$105.00
Dividends	$52.50
Addition to Retained Earnings	$52.50

BALANCE SHEET AS OF 12/31/2015:

ASSETS	2015
Cash	$74.00
Accounts Receivable	$148.00
Inventory	$296.00
Current Assets	$518.00
Net Fixed Assets (Net PPE)	$370.00
Total Assets (TA)	$888.00

LIABILITIES & SHAREHOLDER EQUITY	2015
Accounts Payable and Accruals	$37.00
Notes Payable	$40.00
Current Liabilities	$77.00
Long Term Debt	$310.00
Total Liabilities	$387.00
Common Stock	$300.00
Retained Earnings	$201.00
Owners' Equity	$501.00
Total Liabilities and Shareholder Equity	$888.00

Using the percent-of-sales forecast approach, forecast the 2016 income statement and balance sheet. Be sure the balance sheet balances.

What are the Projected Regular Dividends for 2016?

Answer 1

THERE IS A SURPLUS OF FUND = 13.10, WHICH WILL PAID OUT AS A SPECIAL DIVIDEND

BOND - Microsoft Excel (Product Activation Failed) Add-Ins File Home Insert Page Layout Formulas Data Review View - 2x % Cut Calibri Dr General -11AA = = = B- A E = 5 Wrap Text Fat Merge Merge & Center - Center B I U st $ $ -% % , .0 .00 . Insert Delete Format Conditional Format Formatting as Table Styles Cell Styles Σ AutoSum : A Fill Sort & 2 Clear Filter Editing Find & Select Font Alignment Number Cells fic E Copy Paste Format Painter Clipboard JJ402 IY 402 LOC 403 404 IZ JA JB JC JD J E JE JG H 405 406 INCOME STATEMENT 407 YEAR --> 408 409 SALES 410 COSTS 411 EBIT 412 INTEREST 413 EBT 414 TAX 415 NET INCOME 416 DIVIDEND 417 ADDITION TO 418 RETAINED EARNINGS 419 420 H YIELD SPOT Sheet2 Rea ferences: 1198 CURRENT NEXT 5% INCREASE 1480 1554.00 1270 1333.50 210 220.50 35 35.00 175 185.50 70 74.2 105 111.30 52.5 55.65 (=JA415/12415*12416][ 50% PAYOUT] 52.5 55.65 AFN BANKING NOTE 510 BIDDING, UNDERWRITING EUAC AW PM LIFELP, IP, MRP, INFLATION YIELD WARRANTrefund bond CLEAN INVOICE PRICE BOJ 130% 0 .WEB . * 0 ENG 02:20 14-10-2019

* Cut JD 0 77 BOND - Microsoft Excel (Product Activation Failed) File Home Insert Page Layout Formulas Data Review View Add-Ins - 2x Σ AutoSum : A Calibri -11AA = = = Dr Wrap Text General E Copy Fill Z Paste B I U B- SF A Merge Merge & Center - Center Format Painter $ -% % 4:0 .00 . Conditional Format Cell Insert Delete Format Sort & Find & Formatting as Table Styles 2 Clear Filter Select Clipboard Font Alignment Number Styles Cells Editing JJ421 - for IY I Z JA JB JC JE JF G H I J 421 SALES 1554.00 422 ASSETS CURRENT NEXT LIABILITIES & OWNERS' EQUITY NEXT 423 CURRENT ASSETS YEAR YEAR CURRENT LIABAILITIES AMOUNT % YEAR 424 CASH 74 5.00% 77.70 ACCOUNTS PAYABLE 37 2.50% 38.85 425 ACCOUNTS RECEIVABLE 148 10.00% 155.40 NOTES PAYABLE 40 0 40.00 426 INVENTORY 296 20.00% 310.80 LOC 0.00 427 TOTAL 518 35.00% 543.90 TOTAL 78.85 428 LONG TERM DEBT 3100 310.00 429 FIXED ASSETS OWNERS' EQUITY 430 NET PLANT & EQUIPMENT 370 25.00% 388.50 COMMON STOCK 3000 300.00 RETAINED EARNINGS 243.55 [201+55.65-13.10] 432 TOTAL 501 0 543.55 433 434 TOTAL ASSETS 888.00 60.00% 932.40 TOTAL LIABILITIES & EQUITY 855.000 932.40 435 436 437 ANSWER : EFN = -13.10 (897.75 -509.28-310-37.41-40] check income statement 438 SO THERE IS A SURPLUS OF FUNDS, PAY 13.10 AS SPECIAL DIVIDEND red color figure 55.65 439 SPECIAL DIVIDEND 13.10 H YIELD SPOT Sheet2 AFN BANKING NOTE 510 BIDDING, UNDERWRITING EUAC AW PM LIFELP, IP, MRP, INFLATION YIELD WARRANTrefund bond CLEAN INVOICE PRICE Rea ferences: 1198 BOJ 130% 0 + l * 10 ENG ANG 02:20 14-10-2019 431 201 0 N =