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#1 Assignment 4.4 Exercises Problem 1: Creating Proforma Financial Statements5 Points A pro forma Income Statement for Monroe Products Co. is displayed below: Monroe Products Company. Income Statements, 2019 and Pro Forma 2020 Years Ended December 31st 2019 Actual2020 Forecast Net Sales$ 1,000,000$ 1,250,000 Cost of Goods Sold800,0001,000,000 Gross Profit$ 200,000$ 250,000 Operating Expenses100,000125,000 Depreciation Expense50,00062,500 Operating Income (EBIT)$ 50,000$ 62,500 Interest Expense10,00012,500 Taxable Income$ 40,000$ 50,000 Income Tax Expense15,00018,750 Net Income$ 25,000$ 31,250 Use the information given to construct the Pro Forma Balance Sheet for 2020. a) Sales growth is projected to be 25% in 2020, and Current Assets is expected to grow with Sales. What should Current Assets be in 2020? b) Monroe Products plans to purchase $100,000 of fixed assets in 2020, but will not dispose of any existing fixed assets. What should be its forecast for ending Net Fixed Assets in 2020? c) If Monroe Products pays out 40% of its Net Income in 2020 (payout ratio) and will neither sell nor repurchase equity during the year, what should its forecast for owner's equity be at the end of 2020? d) Given all the above information, What is Monroe Products' projected external funding required for 2020? Use the Template Provided Below to Create Your Solution - Be sure to show or explain your work to get full credit! Input / Output area: Monroe Products Company Balance Sheets, 2019 and Pro Forma 2020 December 31st 20192020 Forecast2019Common Size Current Assets$ 500,000Current Liabilities$ 200,000$ 250,000 Long-Term Debt$ 100,000$ 125,000 Net Fixed Assets$ 400,000Owner's Equity$ 600,000 Total Assets$ 900,000$ -Total Liabilities and Owners' Equity$ 900,000$ 375,000 External Financing Needed:$ (375,000) This is the Student Template, provided in the assignment instructions October 2019 #2 Assignment 4.4 Exercises Problem 2: Creating Proforma Financial Statements10 Points The 2019 Income Statement and Balance Sheet are given below for Van Buren Enterprises. Using the assumptions provided, create the 2020 Pro Forma Income Statement and Balance Sheet. What is the External Funding Required? Van Buren Enterprises.Van Buren Enterprises Income Statement ($ thousands)Balance Sheets Year Ended December 31st, 2019Year Ended December 31st, 2019 ($ thousands) 2019 Actual Net Sales$ 9,8702019 Actual2019 Actual Cost of Goods Sold8,093Current AssetsCurrent Liabilities Gross Profit$ 1,777 Cash and Securities$ 540 Accounts Payable$ 843 Accounts Receivable1,485 Accured Wages48 Operating Expenses986 Inventory810 Total$ 891 Depreciation Expense182 Total$ 2,835 Operating Income (EBIT)$ 609Long-Term Debt$ 1,600 Interest Expense83Net Fixed Assets$ 850Owner's Equity Taxable Income$ 526 Common Stock$ 200 Retained Earnings994 Income Tax Expense110 Total$ 1,194 Net Income$ 416Total Assets$ 3,685Total Liabilities and Owners' Equity$ 3,685 Van Buren Enterprises Assumptions for 2020 Growth rate in Net Sales30%Long-Term Debt ($ estimate)$ 1,400 Cost of Goods Sold (% of Sales)82%Cash/Securities (Days of Sales)20 Operating Expenses (% of Sales)10%Accounts Receivable (% of Sales)15% Depreciation Expense (estimate $)$ 192Inventory Turnover10 Interest Expense (Total estimate $)$ 159Accounts Payable Period (Days)38 Tax Rate21%Accrued Wages ($ estimate)$ 63 Dividend Payout Ratio50%Net Fixed Assets ($ estimate)$ 950 Assume the Interest Expense estimate includes the cost of any new debt required, and Common Stock will not change. Create the 2020 Pro Forma Balance Sheet and Income Statements. What is the External Funding Required? Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers. This is the Student Template, provided in the assignment instructions October 2019 #3 Assignment 4.4 Exercises Problem 3: Preparing a Cash Budget5 Points Fillmore Lawn Mowers Company's estimated sales and purchases for the past three months, plus projected sales and purchases for thenext three months, are shown below: ActualForecast AprilMayJuneJulyAugustSeptember Sales$ 493,200$ 575,400$ 1,644,000$ -$ 822,000$ 328,800$ 328,800 Purchases$ 698,700$ 739,800$ 1,644,000$ -$ 411,000$ 164,400$ 164,400 Only 20% of Filmore's sales are for cash. The company's Average Collection Period from customers is 90 days. It's standard pay terms with suppliers is 45 days. a) What are the company's expected cash receipts in September? b) What would the company's Accounts Receivable balance be at the end of September? c) What are the company's expected cash expenditures for purchases in September? d) What would be the company's Accounts Payable balance at the end of September? Use the Template Provided Below to Create Your Solution - Pay close attention to the formulas and formatting of the inputs. Input area: Cash FlowsActualForecast AprilMayJuneJulyAugustSeptember Sales ($) Purchases ($) Percent Sales in Cash (%) Collection Period (Days) Payables Period (Days) Output area: ActualForecast AprilMayJuneJulyAugustSeptember Cash Sales$ -$ -$ -$ -$ -$ - Credit Sales$ -$ -$ -$ -$ -$ - Receipts: Cash from Current Month Sales$ -$ -$ -$ -$ -$ - Cash from Prior Months Sales$ -$ -$ - Total Cash Receipts$ -$ -$ - Accounts Receivable Balance$ -$ -$ -$ - Credit Purchases$ -$ -$ -$ -$ -$ - Cash for Prior Months Purchases$ -0$ -$ -$ -$ - Accounts Payable Balance$ -$ -$ -$ -$ - This is the Student Template, provided in the assignment instructions October 2019 #4 Assignment 4.4 Exercises Problem 4: Preparing a Cash Budget10 Points Hayes, Inc. is growing steadily, causing some concerns about its cash flow. The company's estimated sales and purchases for the past three months, plus projected sales and purchases for the next three months, are shown below: ActualForecast OctoberNovemberDecemberJanuaryFebruaryMarch Sales$ 250,000$ 275,000$ 300,000$ -$ 325,000$ 350,000$ 400,000 Purchases$ 175,000$ 200,000$ 225,000$ -$ 250,000$ 275,000$ 300,000 Half of Hayes' sales are for cash. The company's Average Collection Period from customers is 60 days. It's standard pay terms with suppliers is 30 days. a) What are the company's expected cash receipts in March? b) What would the company's Accounts Receivable balance be at the end of March? c) What are the company's expected cash expenditures for purchases in March? d) What would be the company's Accounts Payable balance at the end of March? Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers. This is the Student Template, provided in the assignment instructions October 2019 #5 Assignment 4.4 Exercises Problem 5: Preparing a Cash Budget5 points Cleveland Twice Industrials Co. is projecting a potential cash shortfall in the next three months. The company's estimated sales and purchases for the past three months, plus projected sales and purchases for the next three months, are shown below: ActualForecast OctoberNovemberDecemberJanuaryFebruaryMarch Sales$ 240,000$ 280,000$ 800,000$ -$ 400,000$ 160,000$ 160,000 Purchases$ 340,000$ 360,000$ 600,000$ -$ 150,000$ 80,000$ 80,000 30% of Cleveland's sales are for cash. The company's Average Collection Period from customers is 90 days. It's standard pay terms with suppliers is 60 days. In addition, the company is planning the following cash expenditures: Wages Payable Each Month$ 120,000 Taxes Payable End of March$ 110,000 Interest Payable Each Month$ 30,000 Equipment Purchase in February$ 175,000 The company's cash balance on January 1st is $200,000. It desires a minimum cash balance of $100,000 at all times. a) Construct a monthly cash budget for January through March. b) How large a loan does the company need to sustain its minimum cash balance? Use the Template Provided Below to Create Your Solution - Be sure to show or explain your work to get full credit! Input area: Cash FlowsActualForecast OctoberNovemberDecemberJanuaryFebruaryMarch Sales ($)$ - Purchases ($)$ - Other Cash Expenditures ($) Percent Sales in Cash (%)Starting Cash Balance: Collection Period (Days)Minimum Cash Balance: Payables Period (Days) Output area: Forecast JanuaryFebruaryMarch Cash Receipts: Sales for Cash$ -$ -$ - Collections from Credit Sales$ -$ -$ - Total Cash Receipts$ -$ -$ - Cash Disbursements: Payment for Purchases$ -$ -$ - Other Cash Disbursements:$ -$ -$ - Total Cash Disbursements$ -$ -$ - Net Receipts (Disbursements)$ -0$ -0$ -0 Determination of Cash Needs: Beginning Cash$ -0$ -0$ -0 Net Receipts (Disbursements)$ -0$ -0$ -0 Ending Cash$ -0$ -0$ -0 Minimum Cash Desired$ -0$ -0$ -0 Cash Surplus (Deficit)$ -$ -$ - This is the Student Template, provided in the assignment instructions October 2019 #6 Assignment 4.4 Exercises Problem 6: Preparing a Cash Budget10 points Taft, Inc. is planning its financing needs for the next three months. The company's estimated sales and purchases for the past three months, plus projected sales and purchases for the next three months, are shown below: ActualForecast OctoberNovemberDecemberJanuaryFebruaryMarch Sales$ 450,000$ 550,000$ 800,000$ -$ 400,000$ 450,000$ 450,000 Purchases$ 400,000$ 500,000$ 350,000$ -$ 200,000$ 300,000$ 300,000 40% of Taft's sales are for cash. The company's Average Collection Period from customers is 60 days. It's standard pay terms with suppliers is 90 days. In addition, the company is planning the following cash expenditures: Wages Payable Each Month$ 85,000 Taxes Payable End of March$ 80,000 Interest Payable Each Month$ 15,000 Dividend Payment in March$ 75,000 The company's cash balance on January 1st is $350,000. It desires a minimum cash balance of $200,000 at all times. a) Construct a monthly cash budget for January through March. b) Does the company need a loan to sustain its minimum cash balance? If so, how large should it be? Create your Original Solution Below - Be sure to show all calculations and clearly indicate answers. This is the Student Template, provided in the assignment instructions October 2019 #7 Assignment 4.4 Exercises Problem 7: Growth Management Analysis5 Points Coolidge, Inc. provides private policing and security services, primarily for American Indian reservations. Following are some selected financial data for the company for the period 2015-2019: 20152016201720182019 Profit Margin (%)5.0%6.0%3.6%4.2%6.2% Retention Ratio (%)99.5%100.0%100.0%100.0%100.0% Total Asset Turnover Ratio1.201.901.802.002.50 Financial Leverage (Assets/Equity)1.701.801.701.701.70 Actual Growth Rate in Sales (%)36.8%74.6%3.1%15.9%47.1% a) Calculate the company's sustainable growth rate for the years 2015 - 2019.