Complete Problems 17-7 (one year pro forma statement) and 17-8 (total liabilities estimation and forecast of long-term debt financing need) in your course text. In addition, provide two or more suggestions on what Ambrose Inc. could do to reduce the forecasted debt financing (the managerial part of financing). Be sure to provide rationales as to why your suggestions will be effective in reducing the forecasted debt financing need.
17-7: Pro Forma Income Statement - Roberts Inc. (in millions of dollars) 2015 (last year) Change Forecast Formula
1, Sales $3,000.00
2. Operating costs excluding depreciation $2,450.00
3. EBITDA $550.00
4. Depreciation $250.00
5. EBIT $300.00
6. Interest $125.00
7. EBT $175.00
8. Taxes (40%) $70.00
year-end sales are expected to be 10% higher than the 3 billion in sales generated last year
year-end operation costs, excluding depreciation, are expected to equal 80% of year-end sales
Depreciation is expected to increase at the same rate as sales
interest costs are expected to remain unchanged
the tax rate is expected to remain at 40%
on the basis of that information what will be the forecast for robert's year-end net income
----
Problem 2
At year-end 2015
Total Assets: $1.2 million
Accounts payable $375,000
Sales $2.5 million (2015)
--- increase sales by 25% in 2016
assets and account payable are proportional to sales and grow at same rate
no current liabilities other than account payable
Common stock amounted to $245,000 in 2015
retained earnings $295,000
Plans to sell new common stock in amount of $75,000
Profit Margin on sales 6%
60% of earnings will be retained
What were total liabilities in 2015?
How much new long-term debt financing will be needed in 2016? (hint:AFN-New Stock = New Long-term debt)