Question

Winter Technologies 2018 financial statements are shown below. 2019 Sales are forecast to grow by 7%, and dividends are forecast to increase to $1.50 per share in 2019. Create the 2019 financial statements using the percent of sales method (not the AFN equation) assuming the firm is operating at full capacity in 2018. Any extra borrowing will be done with Notes Payable and excess funds will be used to pay down Notes Payable. Interest on all interest-bearing debt is 5% and is paid on the debt outstanding at the end of the prior year.
What is the AFN in 2019?

2018          
Cash           $100,000 Accounts Payable   $ 300,000
Marketable Securities       250,000   Accruals       250,000
Account Receivable       400,000   Notes Payable       500,000
Inventory           800,000          
Total Current Assets   $1,550,000   Total Current Liabilities   $ 1,050,000
Net Property Plant & Equipment   2,500,000   Long-term Debt   750,000
Common Stock   1,500,000
Retained Earnings    750,000
Total Assets       $4,050,000   Total Liabilities and Equity   $ 4,050,000
Income Statement                  
31-Dec-18                      
Sales       $ 5,000,000              
Operating Costs   4,000,000              
EBIT       1,000,000              
Interest       62,500              
EBT       937,500              
Taxes (30%)   281,250              
Net Income   $ 656,250              
Number of shares outstanding   100,000          
Dividends per share     $1.20  

Answer 1

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