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Assume that operating costs, assets, and spontaneous liabilities increase proportionally with sales.   Maverick’s 2017 income statement...

Assume that operating costs, assets, and spontaneous liabilities increase proportionally with sales.   Maverick’s 2017 income statement and balance sheet are provided below.

Determine the percent of sales forecast factors for Maverick’s operating costs, each asset, as well as each spontaneous liability. Format to 2 decimal places. Only complete for applicable cells. If an account does not have a “forecast factor”, then leave it blank.

Calculate the net profit margin, payout ratio, ROE, and ROA for 2017. Format as a percent to 2 decimal places.

Calculate the AFN (using the AFN equation) for 2018 assuming that Maverick’s net profit margin and payout ratio remain constant in 2018. Sales are assumed to increase by 12%. Format in dollars to 2 decimal places.

Calculate the self-supporting growth rate based on the information in the 2017 statements. Format as a percent to 2 decimal places.

Maverick, Inc.
Income Statement
Year Ended December 31, 2017
Sales $ 3,600,000
Operating Costs $ 3,279,720
EBIT $    320,280
Interest $      18,280
EBT $    302,000
Taxes (40%) $    120,800
Net Income $    181,200
Dividends $    108,000
Addition to Retained Earnings $      73,200
Special Diviidends Paid

$             -  
Maverick, Inc.
Balance Sheet
December 31, 2018
Assets
     Cash $    180,000
     Receivables $    360,000
     Inventories $    720,000
       Total Current Assets $ 1,260,000
Fixed Assets $ 1,440,000
Total Assets $ 2,700,000
Liabilities & Owners' Equity
Liabilities  
     Accounts Payable $    325,000
     Accruals $      80,000
     Notes Payable $      56,000
     Line of Credit $             -  
       Total Current Liabilities $    461,000
Long-Term Debt $    235,000
Common Stock $ 1,800,000
Retained Earnings $    204,000
Total Liabilities & Owners' Equity $ 2,700,000
AFN -- Equation
Self-Sustaining Growth Rate
Dividend Payout Ratio
Net Profit Margin
ROE
ROA

Please show the steps

Solutions

Expert Solution

Maverick, Inc.
Income Statement
Year Ended December 31, 2017 Year Ended December 31, 2017 Increase % Increase in value Year Ended December 31, 2018 Remark
Sales $3,600,000 12% $432,000 $4,032,000
Operating Costs $3,279,720 12% $393,566 $3,673,286
EBIT $320,280 $38,434 $358,714
Interest $18,280 $21,018
EBT $302,000 $337,696
Taxes (40%) $120,800 $135,078
Net Income $181,200 $202,617
Dividends $108,000 $118,977
Addition to Retained Earnings $73,200 $83,640
Special Diviidends Paid
$             -  
Pay out Ratio $1.48 $1.42 Devidend/Retained earning
Net Profit Margin 5.03% 5.03% Net profit/ Sale
Maverick, Inc.
Balance Sheet
31-Dec-17 31-Dec-18
Assets
     Cash 160,714.29 12%      19,285.71 $180,000
     Receivables 321,428.57 12%      38,571.43 $360,000
     Inventories 642,857.14 12%      77,142.86 $720,000
       Total Current Assets 1,125,000.00    135,000.00 $1,260,000
Fixed Assets 1,285,714.29 12%    154,285.71 $1,440,000
Total Assets 2,410,714.29    289,285.71 $2,700,000
Liabilities & Owners' Equity
Liabilities  
     Accounts Payable 290,178.57 12%      34,821.43 $325,000
     Accruals 71,428.57 12%        8,571.43 $80,000
     Notes Payable 50,000.00 12%        6,000.00 $56,000
     Line of Credit $             -  
       Total Current Liabilities 411,607.14 49,392.86 $461,000
Long-Term Debt 209,821.43 12%      25,178.57 $235,000
Common Stock 1,800,000.00 $1,800,000
Retained Earnings 120,359.69 $83,640 $204,000
Total Liabilities & Owners' Equity 2,541,788.26 158,211.74 $2,700,000
AFN -- Equation     (131,073.97)    131,073.97
Self-Sustaining Growth Rate
Dividend Payout Ratio 1.48 1.42 Devidend/Return earning
Net Profit Margin 5.03% 5.03% Net profit/Sale
ROE 4.09% 4.17% Return on earning/equity
ROA 3.04% 3.10% Return on earning/Asset
Asset -Liability 1,789,285.71 2,004,000.00 equity

jeff jeffy answered 2 years ago
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