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Chapter 16 Homework Lewis Company Pro Forma Income Statement December 31, 2007 (Thousands of Dollars)                   ...

Chapter 16 Homework

Lewis Company

Pro Forma Income Statement

December 31, 2007

(Thousands of Dollars)

                   2007                                                   Sales              $8,000                                            Operating costs    7,450                                                     EBIT               $ 550                           

Interest              150                         

EBT                $ 400                           

Taxes (40%)           160                          

Net income         $ 240                          

Less: Dividends:

$1.04 ´ 150 =     $ 156  

Addition to R.E.= $   84

Lewis Company

Pro Forma Balance Sheet

December 31, 2007

(Thousands of Dollars)

                       

              2007

Cash         $   80   

Receivables     240   

Inventories    720   

Total current

    assets   $1,040   

Fixed assets 3,200   

Total assets $4,240  

Accounts

Payable        160   

Accrued liab.    40   

Notes payable   252                        

Total current

liabilities $ 452                    

Long-term

debt          1,244                     

Total debt   $1,696                      

Common stock 1,605                       

Retained

Earnings       939              

Total liabilities

         and equity   $4,240                     

On a separate piece of paper (preferably using Excel), complete the following exercises.

        

It expects sales to increase by 20% during 2008 and expects dividends per share to increase to $1.10, based upon 150 shares outstanding. Fixed Assets are closely tied to sales levels. Use the Percent of Sales method to project the 2008 financial statements for the firm. How much AFN doe the firm require?

The firm must maintain a current ratio of 2.3 and a total debt to capital ratio of 40%. How much financing will be obtained using notes payable, long-term debt and common stock?

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