Fin forecasting in class problem

Fin forecasting in class problem - Assets Current...

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Use the following information to answer questions 28-32: Below is the 2005 year-end balance sheet for Orange computers. Sales for 2005 were $3,750,000 and are expected to grow to $4,500,000 in 2006. In addition, we know that Orange Computers plans to pay a $1.50 dividend (per share) in 2006 and expects projected net income to be 7% of sales. Assume there are 100,000 shares outstanding. In forecasting the firm’s EFN, the CFO assumes that current assets and spontaneous current liabilities will vary with sales. The additional sales volume will necessitate an increase in net fixed assets of $120,000. Orange Computers Balance Sheet
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Unformatted text preview: December 31, 2005 Assets Current assets (46.66%) $1,750,000 2,100k Net Fixed assets (+120k) $1,250,000 1,370k Total assets $3,000,000 3,470k Liabilities Accounts payable (21.33%) $800,000 960k Accrued wages (18%) $675,000 810k Notes to bank (non-spon) $225,000 225k Notes payable $150,000 150k Long-term debt $500,000 500k Total liabilities $2,350,000 2645k Common Equity Common stock (plus paid-in capital) $450,000 450k Retained earnings (+165k) $200,000 365k Total common equity $650,000 3460k DFN = 10k Total Liabilities and Common Equity $3,000,000 NI = .07 x 4500k = 315k Change in RE = 315k – (100,000 x $1.50) = 165k...
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