- The Risk Htb Company Has Completed The Following Projections For A Forecast To Be Based On Its 2020 Financial Statements 1 (184.57 KiB) Viewed 9 times
The Risk HTB
Company has completed the following projections for a forecast to be based on its 2020 financial statements. 1. Complete a 5-year financial forecast for the
company consisting of pro-forma income statements, balance sheets and Additional Funds Needed. 2. You may assume the following: a. • Revenues will grow at rate of 25% per year over the 5-year forecast period. b. • Cost of Goods Sold and G&A Expenses will maintain their current percentage of sales during the forecast period. C. • Taxes can be calculated at a rate of 33%, and the dividend payout ratio will be maintained at 45%. d. • The following balance sheet items can be forecasted as a percentage of sales: Cash, Accounts Receivable, Inventory, Pre-paid Expenses, Net Fixed Assets, Accounts Payable and Accrued Taxes and Wages. e. • Notes Payable are assumed to remain constant at current levels and Long-Term Debt can be forecasted as 75% of Net Fixed Assets. You may further assume an interest rate of 8% on both the Notes Payable and the Long Term Debt. f. Assume any External Funding Needed will be in the form of additional Common Equity contributions by the owners of the business. 2. Using the above assumptions, determine the maximum average growth rate over the 5 year forecast period that would result in the owners NOT having to contribute any additional capital. That is, find the sustainable growth rate. (Hint: you may want to find the growth rate in each year of the forecast period, then take the average to determine the average sustainable growth.)
Risk HTB
Company 2020 Financial Statements Income
Statement ($1,000) Revenues Cost of Goods Sold Gross Profit General and Admin Expenses EBIT Interest Expense EBT Taxes (33%) Net Income Dividends (45%) Earnings Avail to Common Shareholders Balance Sheet ($1,000) Assets: Cash Accounts Receivable Inventory Pre-Paid Expenses Total Current Assets Net Fixed Assets Total Assets Liabilities and Equity Accounts Payable Accrued Taxes and Wages Notes Payable Total Current Liabilities Long-term Debt Common Stock Retained Earnings Total Equity Total Liabilities and Equity 7,500 4,125 3,375 1,500 1,875 450 1,425 470 955 430 525 450 1,425 1,200 300 3,375 6,375 9,750 750 375 1,250 2,375 4,500 1,500 1,375 2,875 9,750 2020 2020