Question

Income Statement: Sales Costs except EBITDA 2016 5,555,000 2,756,300 2,798,700 ation 599,000 EBIT Interest Expense (net Pretax Income Income Tax Net Income 2,199,700 100,000 2,099,700 734,895 1,364,805 Balance Sheet 2016 Assets Cash and Equivalents Accounts Receivable Inventories Total Current Assets 1,500,000 1,880,000 1,100,000 4,480,000 Plant and Equipment2,700,000 7,180,000 Total Assets Liabilities and Equit Accounts Payable Debt Total Liabilities Stockholders' Equit Total Liabilities and Equit 1,667,000 1,350,000 3,017,000 4,163,000 7,180,000

The executives at Company X believe the sales for the company will grow during 2017 in 6%, compared to 2016. Calculate the pro-forma financial statements for Company X for 2017 using the percent sales method. To do this assume that the percentage values with respect to sales of the (i) costs except depreciation, (ii) depreciation, (iii) cash and equivalents, (iv) accounts receivable, (v) inventories, (vi) property, plant and equipment, and (vi) accounts payable will stay fixed at the values corresponding for 2016. Assume also that the interest expense and debt will not change in 2017 from its 2016 values, income tax will remain at 35% of the Pretax Income and that in 2017 Company X initially plans to payout 45% of its net income to its shareholders.

1.      What is the forecasted value of sales for 2017? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

"2.      What is the forecasted value of net income for 2017? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

"3.      What is the forecasted value of total assets for 2017? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

"4.      What is the forecasted value of total liabilities for 2017? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

"5.      What is the forecasted value of net new financing 2017? Express the numerical terms of your answer completely. For example: If your answer is one million dollars, write: 1000000."

6.      What option can the financial manager of Corporation X implement in order to balance total assets and total liabilities and equity for 2017?

		a.       Increase the debt by the amount indicated in your calculations of net new financing;
		b.      Increase the dividends by the amount indicated in your calculations of net new financing;