AAA Inc. Balance Sheet For Year Ended Dec 31st, Assets 2024 2023 Cash & Equivalents $78,500 $68,700 2022 $55,500 Marketable Securities $250,000 $250,000 $250,000 Accounts Receivable 3,275,000 2,910,400 2,650,750 Other Receivables 151,800 142,500 134,500 Inventory Prepaid Expenses 2,923,800 2,757,400 2,675,500 182,850 171,400 152,250 Total Current Assets 6,861,950 6,300,400 5,918,500 Prop, Plant & Equip - Net 17,203,450 16,123,420 13,875,750 Total Assets $24,065,400 $22,423,820 $19,794,250 2024 2023 2022 Liabilities & Equity Accounts Payable $3,133,500 $2,581,616 $2,130,200 Accrued Wages Payable Other Accrued Liabilities 475,540 389,500 313,500 110,350 102,500 84,500 Income Tax Payable 275,450 225,200 195,450 Short-term Bank Loan 2,873,500 2,135,420 1,733,900 Total Current Liabilities 6,868,340 5,434,236 4,457,550 Long-term Debt 5,234,940 6,238,025 5,475,200 Total Liabilities 12,103,280 11,672,261 9,932,750 Common Stock 4,800,500 4,230,500 3,950,400 Retained Earnings 7,161,620 6,521,059 5,911,100 Total Equity 11,962,120 10,751,559 9,861,500 Total Liabilities and Equity $24,065,400 $22,423,820 $19,794,250 AAA Inc. Income Statement For Year Ended Dec. 31st 2024 2023 2022 Sales $48,530,420 $43,293,850 $36,367,300 Cost of Goods Sold 34,898,300 31,385,200 27,121,450 Selling Expenses 1,243,035 1,135,000 975,000 Utilities Expenses Administrative Expenses 603,200 567,320 535,600 723,900 598,500 482,000 Advertising Expenses 925,205 810,250 675,000 Rent Expense 502,850 475,250 450,300 Research and Development Expense 423,800 338,360 303,000 Depreciation 1,525,500 1,325,520 1,154,000 Earnings before Interest and Taxes 7,684,630 6,658,450 4,670,950 Interest Expense 1,239,230 938,220 613,450 Earnings before Taxes 6,445,400 5,720,230 4,057,500 Taxes (32%) 2,062,528 1,830,474 1,298,400 Net Income $4,382,872 $3,889,756 $2,759,100
QUESTION #1:
A) What is the Net Operating Profit After Tax (NOPAT) for 2024?
B) What is the Operating Cash Flow for 2024?
C) What is the Free Cash Flow for 2024?
Note: Marketable securities are non-operating current assets, and short-term debt (bank loan) is a non-operating current liability. Both of these items are excluded from the calculation of net operating working capital.
D) If the stock trades for $85 per share at the end of 2024, and there are 315,000 shares outstanding, what is the MVA in 2024?
E) Given that the firm’s WACC is 14%, what is the EVA during 2024?
F) Create common size income statement and balance sheet for 2024, 2023 and 2022.
G) Using 2022 as the base year, create income statement and balance sheet percentage change analysis for 2024 and 2023.
QUESTION #2:
In addition to the AAA Ltd. financial statements in Problem One, you are given more information as follows.
Sales are forecast to increase by 80% in 2025.
Short-term Debt, Long-term Debt, and Common Stock will not change. In 2025, the company’s dividend payout ratio will be 80%.
Cost of goods sold is expected to be 73% of sales. Selling expenses will be 3.0% of sales. Utilities Expenses will be 1.5% of sales. Administrative expenses will be 2.0% of sales. Advertising expenses will be 2.2% of sales. Rent Expense will be 1.0% of sales and Research and Development expense will be 1.2% of sales. Depreciation expense in 2025 is expected to be $1,820,000.
Cash is expected to be 0.20% of sales, accounts receivable will be 7.5% of sales, other receivables will be 0.4% of sales, inventory will be 6.3% of sales and prepaid expenses will be 0.8% of sales. Net Plant and Equipment is forecasted to be $19,720,000 next year. Marketable Securities will not change in 2025.
Accounts payable will be 7.1% of sales. Accrued wages payable will be 1.3% of sales. Other accrued liabilities will be 0.3% of sales. Income taxes payable will be 10% of the forecasted net income for 2025.
The company is expected to pay 9% per year compounded annually on its short-term bank loan and 12% per year compounded annually on its long-term debt. The interest expense on the short-term debt in 2025 is calculated as: [interest rate on short-term debt * amount of short-term debt outstanding at the end of 2024]. The interest expense on the long-term debt in 2025 is calculated as: [interest rate on long-term debt * amount of long-term debt outstanding at the end of 2024]. The interest earned on marketable securities will be 4.5% per year compounded annually. The interest earned on marketable securities in 2025 is calculated as: [interest earned on marketable securities * amount of marketable securities at the end of 2024].
The company’s tax rate for 2025 will be 32%.
A) Complete the pro-forma income statement and balance sheet for 2025.
B) Calculate the amount of Additional Funds Needed in 2025.
Please answer using excel to confirm your calculations.
Please use finance functions included in google sheets/excel whereever it is deemed appropriate, such as PV, FV, EFFECT, PMT.. etc
Answer ALL the questions.
When rounding, DO NOT ROUND ANY CALCULATIONS (this can be easily done with functions in excel), and round the final answers to 2 decimal places.
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