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Unformatted text preview: DFN #2 Below is the 2005 year-end balance sheet for Orange com puters. Sales for 2005 w ere $3,750,000 and are expected to grow to $4,500,000 in 2006. In addition, w e know that Orange Com puters plans to pay a $1.50 dividend (per share) in 2006 and expects projected net incom e to be 7% of sales. Assum e there are 100,000 shares outstanding. In forecasting the firm ’s DFN, the CFO assum es that current assets and spontaneous current liabilities w ill vary w ith sales. The additional sales volum e w ill necessitate an increase in net fixed assets of $120,000. O rang e C o m puters B alan ce S heet D ecem ber 31, 20 05 A ssets C urrent assets $ 1,7 50 ,000 N et Fixed assets $ 1,2 50 ,000 T otal assets $ 3,0 00 ,000 L ia bilities A ccounts payable $ 800 ,00 0 A ccru ed expenses $ 675 ,00 0 N otes P ayable $ 375,000 L ong-term debt $ 500 ,00 0 T otal liabilities $ 2,3 50 ,000 C om m o n E quity C om m on stock (plus paid-in capital) $ 450 ,00 0 R etained earn ings $ 200 ,00 0 T otal co m m on equity $ 650 ,00 0 T otal L iabilities an d C o m m on E q uity $ 3,0 00 ,000...
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