INCOME STATEMENTS 2009 2010 BALANCE SHEETS 2009 2010Assets

Sales 2,850.00 3,000.00 Cash 15.00 9.98Costs except depreciation 2,497.00 2,616.20 ST Investments 65.00 0.00Depreciation 90.00 100.00 Accounts receivable 315.00 375.00Total operating costs 2,587.00 2,716.20 Inventories 415.00 615.00EBIT 263.00 283.80 Total current assets 810.00 999.98Less interest (INT) 60.00 88.00 Net plant and equip. 870.00 1,000.00Earnings before taxes (EBT) 203.00 195.80 Total assets 1,680.00 1,999.98Taxes (40%) 81.20 78.32Income before pref. dividends 121.80 117.48 Liabilities and equityPreferred dividends 4.00 4.00 Accounts payable 30.00 60.00Net income for common (NI) 117.80 113.48 Accruals 130.00 140.00

Notes payable 60.00 110.00Dividends to common (DIVs) 53.00 57.50 Total current liab. 220.00 310.00

Long-term bonds 580.00 754.0064.80 55.98 Total liabilities 800.00 1,064.00

Shares of common stock 50.00 50.00 Preferred stock 40.00 40.00Earnings per share (EPS) 2.36 2.27 Common stock 130.00 130.00Dividends per share (DPS) 1.06 1.15 Retained earnings 710.00 765.98Price per share (P) 26.00 23.00 Total common equity 840.00 895.98

Total liab. & equity 1,680.00 1,999.98

Add. to retained earnings: (NI – DIVs)

S0 Last year's sales, i.e., 2010 sales 3,000.00g Forecasted growth rate in sales 10.00%S1 Coming year's sales, i.e., 2011 sales = S0 × (1 + g) 3,300.00ΔS Change in sales = S1 – S0 = ΔS 300.00A0* Assets that must increase to support the increase in sales 1,999.98A0* / S0 Required assets per dollar of sales 66.7%L0* Last year's spontaneous assets, i.e., payables + accruals 200.00L0* /S0 Spontaneous liabilities per dollar of sales 7%Profit margin (M) 2010 profit margin = net income/sales 3.8%Payout ratio (POR) Last year's dividends / net income = % of income paid out 50.7%

AFN =(A0*/S0)∆S - (L0*/S0)∆S –S1M(1-POR) 118.42

INCOME STATEMENTS 2009 2010 BALANCE SHEETS 2009Assets

Sales 2,850.00 3,000.00 Cash 15.00Costs except depreciation 2,497.00 2,616.20 ST Investments 65.00Depreciation 90.00 100.00 Accounts receivable 315.00Total operating costs 2,587.00 2,716.20 Inventories 415.00EBIT 263.00 283.80 Total current assets 810.00Less interest (INT) 60.00 88.00 Net plant and equip. 870.00Earnings before taxes (EBT) 203.00 195.80 Total assets 1,680.00Taxes (40%) 81.20 78.32Income before pref. dividends 121.80 117.48 Liabilities and equityPreferred dividends 4.00 4.00 Accounts payable 30.00Net income for common (NI) 117.80 113.48 Accruals 130.00

Notes payable 60.00Dividends to common (DIVs) 53.00 57.50 Total current liab. 220.00

Long-term bonds 580.0064.80 55.98 Total liabilities 800.00

Shares of common stock 50.00 50.00 Preferred stock 40.00Earnings per share (EPS) 2.36 2.27 Common stock 130.00Dividends per share (DPS) 1.06 1.15 Retained earnings 710.00Price per share (P) 26.00 23.00 Total common equity 840.00

Total liab. & equity 1,680.00Investor supplied capital 1,520.00

Add. to retained earnings: (NI – DIVs)

2010 Inputs PROJECTED INCOME STATEMENTSOperating Ratios:

9.98 Sales growth rate 10.00% Sales0.00 Op costs except depr'n / Sales 87.21% Costs except depreciation

375.00 Depr'n / Net plant & equip. 10.00% Depreciation615.00 Cash / Sales 0.33% Total operating costs999.98 Accounts Rec. / Sales 12.50% EBIT

1,000.00 Inventory / Sales 20.50% Less interest (INT)1,999.98 Net plant & equip. / Sales 33.33% Earnings before taxes (EBT)

Accounts Pay. / Sales 2.00% Taxes (40%)Accruals / Sales 4.67% Income before pref. dividends

60.00 Tax rate: 40.00% Preferred dividends140.00 Financing Data: Net income for common (NI)110.00 Notes payable/Investor-sup cap 6.11% Shares of common stock310.00 LT bonds/Investor-sup capital 41.89% Dividend per share754.00 Pref. stock/Investor-sup cap. 2.22% Dividends to common (DIVs)

1,064.00 Comm equity/Investor-sup cap 49.78%40.00 Interest rate on notes payable 9.00%

130.00 Interest rate on L-T bonds 11.00% PROJECTED BALANCE SHEETS765.98 Dividend rate on pfd stock 10.00% Assets895.98 Target dividend payout ratio 50.67% Cash

1,999.98 ST Investments1,799.98 Accounts receivable

InventoriesTotal current assetsNet plant and equip.Total assets

Liabilities and equityAccounts payableAccrualsNotes payableTotal current liab.Long-term bondsTotal liabilitiesPreferred stockCommon stockRetained earningsTotal common equityTotal liab. & equityRequired assetsSpecified sources of financingAFNRequired additional notes payableAdditional shortterm investment

Add. to retained earnings: (NI – DIVs)

2011

3,300.002877.82

1102987.82

312.1892.84

219.3487.736131.60

4127.60

501.242

62.165.50

10.9780

412.5676.5

1100.01100

2200.0

66154

224.494444.494

754.001198.5

40.00130.00831.48961.482200.02200.0

2,085.48114.494114.494

0.000