Assume that operating costs, assets, and spontaneous liabilities increase proportionally with sales. Maverick’s 2015 income statement and balance sheet are provided below.
Determine the percent of sales forecast factors for Maverick’s operating costs, each asset, as well as each spontaneous liability.
Calculate the net profit margin and payout ratio for 2015.
Calculate the AFN for 2016 assuming that Maverick’s net profit margin and payout ratio remain constant in 2016. Sales are assumed to increase by 10% (Part II). What is the AFN if sales grow by 15% (Part III)?
Calculate the self-supporting growth rate based on the information in the 2015.
Present your results in an attractive and concise table (use cell references where appropriate).
Then, develop preformed income statements and balance sheets for 3 years (2016-2018)
Assume that sales will increase by 10% each year.
Dividends will grow by 5% over the prior year.
The firm is operating at full capacity.
Use the forecast factors determined in Part I for 2016-2018 projections.
There will be no additions to common stock or long-term debt (notes payable).
Any additional funds needed will be added as a line of credit (LOC) at the end of the year.
If additional funds are needed and a LOC is drawn upon, then that amount will also incur interest charges in the subsequent year.
Interest on debt is 13% and is based on the balance at the end of the previous year.
Any surplus will be paid out as a special dividend.
Note: you can use the Excel tool “Goal Seek” or manually plug the value to determine the amount of special dividend/ LOC.
Clearly indicate for each projected year the amount of additional financing needed or special dividend.
Calculate the NPM, ROA, and ROE as well as the payout ratio for the current year (2015) as well as each projected year.