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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