orecast 2020 income statement and balance sheet using the percent of sales method and the following assumptions: (1) sales in 2020 will be 12.5 million; (2) tax rate keeps the same; (3) each item that changes with sales will be the 2 year average percentage of sales; (4) fixed asset will increase $1,000,000 with a 10 year straight line depreciation schedule with 0 salvage value; (5) the common stock dividends will be $202,000; (6) interest rate on short-term and long-term debt will be 9%; (7) Cash , short-term investment will be the same as 2019; (8) COGS, Selling G&A expenses, A/R, inventory, A/P, Accruals will change in proportion to sales; (9) Notes payable and long-term debt will keep the same; and if there is borrowing need, the company will borrow from long-term debt; (10) the company will not issue stocks in 2020. a) What is the additional funds needed in 2020? Is this a surplus or deficit or balanced? (Without iteration, or borrowing happens at last day of the year) b) Assume that the AFN will be absorbed by long-term debt, set up an iterative worksheet to find total accumulated AFN (borrowing happens during the year) c) Why accumulated AFN increases in part b)? Please explain the phenomenon.
orecast 2020 income statement and balance sheet using the percent of sales method and the following assumptions: (1) sales in 2020 will be 12.5 million; (2) tax rate keeps the same; (3) each item that changes with sales will be the 2 year average percentage of sales; (4) fixed asset will increase $1,000,000 with a 10 year straight line depreciation schedule with 0 salvage value; (5) the common stock dividends will be $202,000; (6) interest rate on short-term and long-term debt will be 9%; (7) Cash , short-term investment will be the same as 2019; (8) COGS, Selling G&A expenses, A/R, inventory, A/P, Accruals will change in proportion to sales; (9) Notes payable and long-term debt will keep the same; and if there is borrowing need, the company will borrow from long-term debt; (10) the company will not issue stocks in 2020. a) What is the additional funds needed in 2020? Is this a surplus or deficit or balanced? (Without iteration, or borrowing happens at last day of the year) b) Assume that the AFN will be absorbed by long-term debt, set up an iterative worksheet to find total accumulated AFN (borrowing happens during the year) c) Why accumulated AFN increases in part b)? Please explain the phenomenon.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
100%
a) What is the additional funds needed in 2020? Is this a surplus or deficit or balanced? (Without iteration, or borrowing happens at last day of the year)
b) Assume that the AFN will be absorbed by long-term debt, set up an iterative worksheet to find total accumulated AFN (borrowing happens during the year)
c) Why accumulated AFN increases in part b)? Please explain the phenomenon.
Transcribed Image Text:Rhodes Corporation: Income Statements for Year Ending December 31
2019
2018
Sales
11,000,000
10,000,000
COGS
9,322,000
8,448,000
Gross profit
1,678,000
1,552,000
Depreciation and amortization
380,000
360,000
Selling & Admin. Expenses
290,000
280,000
Earnings before interest and taxes
1,008,000
912,000
Interest expense
220,000
100,000
Earnings before taxes
788,000
812,000
Taxes
197,000
203,000
Net income
591,000
609,000
Rhodes Corporation: Balance Sheets as of December 31
2019
2018
Assets
Cash
842,000
500,000
Short-term investments
110,000
100,000
Accounts receivable
2,750,000
2,50
Inventories
1,650,000
1,500,000
Total current assets
5,352,000
4,600,000
Gross plant and equipment
4,813,000
4,375,000
Accumulated Depreciation
1,255,000
875,000
Net plant and equipment
3,558,000
3,500,000
Total assets
8,910,000
8,100,000
Liabilities & Owner's Equity
Accounts Payable
1,100,000
1,000,000
Accruals
550,000
500,000
Notes Payable
384,000
200,000
Total current liabilities
2,034,000
1,700,000
Long-term debt
1,100,000
1,000,000
Total liabilities
3,134,000
2,700,000
Common stock
4,312,000
4,400,000
Retained earnings
1,464,000
1,000,000
Total common equity
5,776,000
5,400,000
Total liabilities and equity
8,910,000
8,100,000
Note:
Tax rate
25%
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