Question

1. Winter Technologies 2018 financial statements are shown below. 2019 Sales are forecast to grow by 7%, and dividends are forecast to increase to $1.50 per share in 2019. Create the 2019 financial statements using the percent of sales method (not the AFN equation) assuming the firm is operating at full capacity in 2018. Any extra borrowing will be done with Notes Payable and excess funds will be used to pay down Notes Payable. Interest on all interest-bearing debt is 5% and is paid on the debt outstanding at the end of the prior year.

What is the AFN in 2019?

			2018
Cash			$100,000	Accounts Payable		$       300,000
Marketable Securities			250,000	Accruals		250,000
Account Receivable			400,000	Notes Payable		500,000
Inventory			800,000
Total Current Assets			$1,550,000	Total Current Liabilities		$    1,050,000
Net Property Plant & Equipment			2,500,000	Long-term Debt		750,000
				Common Stock		1,500,000
				Retained Earnings		750,000
Total Assets			$4,050,000	Total Liabilities and Equity		$    4,050,000
Income Statement
31-Dec-18
Sales		$       5,000,000
Operating Costs		4,000,000
EBIT		1,000,000
Interest		62,500
EBT		937,500
Taxes (30%)		281,250
Net Income		$          656,250
Number of shares outstanding			100,000
Dividends per share			$1.20

Answer 1

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