Eng 111 - Week 3 Discussion

Eng 111 - Week 3 Discussion - Discussion Sheet 2 10/14/2011...

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Discussion Sheet 2 10/14/2011 Week 3: Financial Planning Models, Present Value TA: Ravichandran Ramakrishnan Percent of Sales and Pro Forma statements: Pro Forma statements are usefu for making projections about future capital requirements. The percent of sales approach assumes that assets and accounts payable remain constant as a percent of sales and that costs are a fixed percentage of sales. Example 1: Example Corp. wants to target a 25% increase in sales what will their projected income statement and balance sheet look like. The dividend payout ratio for the firm is .5 Example Corp. Balance Sheet 2010 Projected 2010 Projected Current Assets Current Liabilities Cash 25 Accounts Payable 20 Accounts Receivable 30 Notes Payable 0 Inventory 20 Long-Term Debt 1500 Fixed Assets 2000 Common Stock 100 Total Assets 2075 Retained Earnings 455 Example Corp. Income Statement 2010 Projected Sales 100 Costs 40 Taxable Income 60 Taxes (40%) 24 Net Income 36 Find the External Financing Needed to generate this growth in sales? Define the EFN?
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Eng 111 - Week 3 Discussion - Discussion Sheet 2 10/14/2011...

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