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    Financial Management C11 P11

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    lynusann
    The Henley Corporation is a privately held company specializing in lawn care products and services. The most recent financial statements are shown below.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Financial Management C11 P11

    Uploaded by

    lynusann
    322 views4 pages
    The Henley Corporation is a privately held company specializing in lawn care products and services. The most recent financial statements are shown below.

    Copyright

    © © All Rights Reserved

    Available Formats

    XLSX, PDF, TXT or read online from Scribd

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    The Henley Corporation is a privately held company specializing in lawn care products and services. The most recent financial statements are shown below.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    322 views4 pages

    Financial Management C11 P11

    Uploaded by

    lynusann
    The Henley Corporation is a privately held company specializing in lawn care products and services. The most recent financial statements are shown below.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    You are on page 1of 4

    Chapter:

    Problem:

    12
    10

    Start with the partial model in the file Ch12 P10 Build a Model.xls on the textbooks Web site, which contains the
    2013 financial statements of Zieber Corporation. Forecast Zeiber's 2014 income statement and balance sheets. Use
    the following assumptions: (1) Sales grow by 6%. (2) The ratios of expenses to sales, depreciation to fixed assets,
    cash to sales, accounts receivable to sales, and inventories to sales will be the same in 2014 as in 2013. (3) Zeiber
    will not issue any new stock or new long-term bonds. (4) The interest rate is 11% for long-term debt and the interest
    expense on long-term debt is based on the average balance during the year . (5) No interest is earned on cash. (6)
    Dividends grow at an 8% rate. (6) Calculate the additional funds needed (AFN). If new financing is required, assume
    it will be raised by drawing on a line of credit with an interest rate of 12%. Assume that any draw on the line of credit
    will be made on the last day of the year, so there will be no additional interest expense for the new line of credit. If
    surplus funds are available, pay a special dividend.
    a. What are the forecasted levels of notes payable and special dividends?

    Key Input Data:

    Used in the
    forecast
    40%
    8%

    Tax rate
    Dividend growth rate
    Rate on notes payable-term debt, rstd

    9%

    Rate on long-term debt, rd

    11%

    Rate on line of credit, rLOC

    12%

    December 31 Income Statements:


    (in thousands of dollars)

    Sales
    Expenses (excluding depr. & amort.)
    Depreciation and Amortization
    EBIT
    Interest expense on long-term debt
    Interest expense on line of credit
    EBT
    Taxes (40%)
    Net Income
    Common dividends (regular dividends)
    Special dividends
    Addition to retained earnings (DRE)

    Forecasting
    2013
    2014
    2013
    basis
    Ratios
    Inputs
    $455,150
    Growth
    $386,878
    % of sales
    $14,565 % of fixed assets
    $53,708
    $11,880 Interest rate x average debt during year
    $0
    $41,828
    $16,731
    $25,097
    $12,554
    Growth
    8.00%
    $0
    $12,543

    December 31 Balance Sheets


    (in thousands of dollars)
    Forecasting
    2013
    basis

    2013
    Ratios

    2014
    Inputs

    Without adj.

    Assets:
    Cash
    Accounts Receivable
    Inventories
    Total current assets
    Fixed assets
    Total assets

    $18,206
    $100,133
    $45,515
    $163,854
    $182,060
    $345,914

    Liabilities and equity


    Accounts payable
    Accruals
    Line of credit
    Total current liabilities
    Long-term debt
    Total liabilities
    Common stock
    Retained Earnings
    Total common equity
    Total liabilities and equity

    $31,861 % of sales
    $27,309 % of sales
    $0 Previous
    $59,170
    $120,000 Previous
    $179,170
    $60,000 Previous
    $106,745 Previous + RE
    $166,745
    $345,914

    % of sales
    % of sales
    % of sales
    % of sales

    Increase in spontaneous liabilities (accounts payable and accruals)


    + Increase in long-term bonds, preferred stock and common stock
    + Net income minus regular common dividends
    Increase in financing
    Increase in total assets
    Amount of deficit or surplus financing:
    If deficit in financing (negative), draw on line of credit
    If surplus in financing (positive), pay special dividend

    contains the
    nce sheets. Use
    o fixed assets,
    013. (3) Zeiber
    and the interest
    d on cash. (6)
    quired, assume
    the line of credit
    ne of credit. If

    2014
    Forecast

    2014
    Adj.

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