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PROBLEM 6-7 Given Solution Legend Solution a-b. Balance Sheet Cash and Marketable Securities Accounts Receivable Inventories Current Assets Net...

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" 6-12. FORCASTING PRO FORMA FINANCIAL STATEMENTS: PREPARE A PRO FORMA INCOME STATEMENT AND BALANCE SHEET FOR WEBB ENTERPRISES, FOUND in problem 6-7, where revenues are expected to grow by 20% in 2011. MAKE THE FOLLOWING ASSUMPTIONS IN MAKING YOUR FORECAST OF THE FIRM’S BALANCE SHEET FOR 2011:
A. The income statement expenses are a constant percent of revenues except for interest, which remains equal in dollar amount to the 2010 level, and taxes, which equal 40% of earnings before taxes.
B. The cash and marketable securities balance remains equal to $500, and the remaining current asset accounts and fixed assets increase in proportion to revenues for 2010.
C. Net property, plant, and equipment increase in proportion to the increase in revenues.
D. Accounts payable increase in proportion to firm revenues.
E. Owners’ equity increases by the amount of firm net income for 2011 (no cash dividends are paid).
F. Long term debt remains unchanged and short term debt changes in an amount that balances the balance sheet.

6-13. using your pro forma financial statements from problem 6-12, estimate the firm’s FCF for 2011
PROBLEM 6-7 Solution Legend = Value given in problem Given Solution a-b. = Formula/Calculation/Analysis required Balance Sheet 2010 = Qualitative analysis or Short answer required Cash and Marketable Securi $500 = Goal Seek or Solver cell Accounts Receivable 6,000 = Crystal Ball Input Inventories 9,500 = Crystal Ball Output Current Assets $16,000 Net Property Plant & Equipm 17,000 Total $33,000 0.00% Accounts Payable $7,200 Short-term Debt 6,800 Current Liabilities $14,000 Long-term Debt 7,000 Total Liabilities $21,000 Total Owners' Equity 12,000 Total Liabilities and Owne $33,000 0.00% Income Statement 2010 Revenues $30,000 100.00% Cost of Goods Sold (20,000) Gross Profit $10,000 Operating Expenses (8,000) Net Operating income $2,000 Interest Expense (900) Earnings before Taxes $1,100 Taxes (400) Net Income $700 Solution c.
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PROBLEM 6-12 Solution Legend = Value given in problem Given (refer to problem 6-7): = Formula/Calculation/Analysis required Balance Sheet 2010 = Qualitative analysis or Short answer required Cash and Marketable Securities $500 0.00% = Goal Seek or Solver cell Accounts Receivable 6,000 0.00% = Crystal Ball Input Inventories 9,500 0.00% = Crystal Ball Output Current Assets $16,000 0.00% Net Property Plant & Equipment 17,000 0.00% Total $33,000 0.00% Accounts Payable $7,200 0.00% Short-term Debt 6,800 0.00% Current Liabilities $14,000 0.00% Long-term Debt 7,000 0.00% Total Liabilities $21,000 0.00% Total Owners' Equity 12,000 0.00% Total Liabilities and Owners' Equity $33,000 0.00% Income Statement 2010 Revenues $30,000 100.00% Cost of Goods Sold (20,000) 0.00% Gross Profit $10,000 0.00% Operating Expenses (8,000) 0.00% Net Operating income $2,000 0.00% Interest Expense (900) 0.00% Earnings before Taxes $1,100 0.00% Taxes (400) 0.00% Net Income $700 0.00% Projected growth rate in revenues 20% Tax rate 40% Solution: Pro forma Income Statement 2011 Sales Cost of Goods Sold Gross Profit Operating Expenses Net Operating income Interest Expense Earnings before Taxes Taxes Net Income Balance Sheet 2011 Cash and Marketable Securities Accounts Receivable Inventories Current Assets Net Property Plant & Equipment Total Accounts Payable Short-term Debt Current Liabilities Long-term Debt Total Liabilities Total Owners' Equity Total Liabilities and Owners' Equity Additional Short-term Debt Needed
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