The following tables summarize the 2022 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial manager forecasts a 20% increase in sales and costs in 2023. The ratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 4% of debt at the start of the year. Sales Costs Interest Pretax profit Tax Net income INCOME STATEMENT, 2022 (Figures in $ thousands) $ 1,750 1,050 (50% of average assets) a (60% of sales) (4% of debt at start of year) b 24 $ 676 203 $ 473 (30% of pretax profit) a b Assets at the end of 2021 were $3,400,000. Debt at the end of 2021 was $600,000. Assets Total BALANCE SHEET, YEAR-END 2022 (Figures in $ thousands) $ 3,600 $ 3,600 Debt Equity $ 600 3,000 $ 3,600 a. What the implied level of assets at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Round your answer to 2 decimal places.
The following tables summarize the 2022 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial manager forecasts a 20% increase in sales and costs in 2023. The ratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 4% of debt at the start of the year. Sales Costs Interest Pretax profit Tax Net income INCOME STATEMENT, 2022 (Figures in $ thousands) $ 1,750 1,050 (50% of average assets) a (60% of sales) (4% of debt at start of year) b 24 $ 676 203 $ 473 (30% of pretax profit) a b Assets at the end of 2021 were $3,400,000. Debt at the end of 2021 was $600,000. Assets Total BALANCE SHEET, YEAR-END 2022 (Figures in $ thousands) $ 3,600 $ 3,600 Debt Equity $ 600 3,000 $ 3,600 a. What the implied level of assets at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Round your answer to 2 decimal places.
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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Transcribed Image Text:The following tables summarize the 2022 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial
manager forecasts a 20% increase in sales and costs in 2023. The ratio of sales to average assets is expected to remain at 0.50.
Interest is forecasted at 4% of debt at the start of the year.
Sales
Costs
Interest
Pretax profit
Tax
Net income
INCOME STATEMENT, 2022
(Figures in $ thousands)
$ 1,750
1,050
(50% of average assets) a
(60% of sales)
(4% of debt at start of year) b
24
$ 676
203
$ 473
(30% of pretax profit)
a
b
Assets at the end of 2021 were $3,400,000.
Debt at the end of 2021 was $600,000.
Assets
Total
BALANCE SHEET, YEAR-END 2022
(Figures in $ thousands)
$ 3,600
$ 3,600
Debt
Equity
$ 600
3,000
$ 3,600
a. What the implied level of assets at the end of 2023?
Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands.
b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in
2023?
Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands.
c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2023?
Note: Round your intermediate calculations to the nearest whole dollar amount. Round your answer to 2 decimal places.
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