Hill Propane Distributors wants to construct a pro forma balance sheet for 2010. Build the statement using the following data and assumptions:
1. Projected sales for 2010 are $35 million.
2. Hill's gross profit margin is 35 percent.
3. Operating expenses average 10 percent of sales.
4. Depreciation expense last year was $5 million.
5. Hill faces a tax rate of 35 percent.
6. Hill distributes 20 percent of its net income to shareholders as a dividend.
7. Hill wants to maintain a minimum cash balance of $3 million.
8. Accounts receivable equal 8.5 percent of sales.
9. Inventory averages 10 percent of cost of goods sold.
10. Last year's balance sheet lists net fixed assets of $30 million. All these assets are depreciated on a straight-line basis, and none of them will be fully depreciated for at least three years.
11. Hill plans to invest an additional $1 million in fixed assets that it will depreciate over a five-year life on a straight-line basis.
12. In 2009, Hill reported common stock and retained earnings of $20 million.
13. Accounts payable averages 9 percent of sales. Will Hill Propane's cash balance at the end of 2010 exceed its minimum requirement of $3 million?