FCF 9th Edition Chapter 04

Chapter 4Problems 1-33Input boxes in tan Output boxes in yellow Given data in blue Calculations in red Answers in green NOTE: Some functions used in these spreadsheets may require that the "Analysis ToolPak" or "Solver Add-In" be installed in Excel. To install these, click on the Office button then "Excel Options," "Add-Ins" and select "Go." Check "Analyis ToolPak" and "Solver Add-In," then click "OK."

require that

Chapter 4Question 1,2 Input area:

Income statement Sales $ 23,000 Costs 16,700 Net income $ 6,300 Sales increase Payout rate 15% 50%

Assets Total

Balance sheet $ 15,800 Debt Equity $ 15,800 Total

$ $

5,200 10,600 15,800

Output area:

Pro forma income statement Sales $ 26,450 Costs 19,205 Net income $ 7,245 Dividends $ 5,655

Assets Total

Pro forma balance sheet $ 18,170 Debt $ Equity $ 18,170 Total $

5,980 12,190 18,170

Pro forma income statement Sales $ 26,450.00 Costs 19,205.00 Net income $ 7,245.00 Dividends Add. To RE $ $ 3,622.50 3,622.50

Assets Total

Pro forma balance sheet $ 18,170 Debt $ 5,200.00 Equity 14,222.50 $ 18,170 Total $ 19,422.50 $ (1,252.50)

External financing needed

Chapter 4Question 3 Input area:

Income statement Sales $ 6,300 Costs 3,890 Net income $ 2,410 Next year's sales $ 7,434

Assets Total

Balance sheet $ 18,300 Debt Equity $ 18,300 Total

Output area:

Percent increase in sales Pro forma income statement Sales $ 7,434 Costs 4,590 Net income $ 2,844 External financing $ 450

18.00% Pro forma balance sheet Assets $ 21,594 Debt Equity Total $ 21,594 Total

e sheet $ 12,400 5,900 $ 18,300

$ 12,400 8,744 $ 21,144


Sales Costs Taxable income Taxes Net income Next year's sales Dividend paid Tax rate

$ $ $ $ $

19,500 15,000 4,500 1,800 2,700 21,840 1,400 40%

Assets Total

$ $

98,000 Debt Equity 98,000 Total

Output area:

Percent increase in sales Pro forma income statement Sales $ 21,840.00 Costs 16,800.00 Taxable income $ 5,040.00 Taxes (40%) 2,016.00 Net income $ 3,024.00 Dividends $ 1,568.00 Add. To RE $ 1,456.00 External financing $ 10,304.00

12% Pro forma balance sheet Assets $ 109,760.00 Debt Equity Total $ 109,760.00 Total

$ $

52,500 45,500 98,000

$ $

52,500.00 46,956.00 99,456.00


Sales Costs Taxable income Taxes Net income Sales increase Payout ratio Tax rate

$ $ $

4,200 3,300 900 306 594 15% 40% 34%

Current assets Fixed assets Total assets

$

$

3,600 Current liabilities 7,900 Long-term debt Equity 11,500 Total

$

$

2,100 3,650 5,750 11,500

Output area:

Pro forma income statement Sales $ 4,830.00 Costs 3,795.00 Taxable income $ 1,035.00 Taxes (34%) 351.90 Net income $ 683.10 Dividends $ 273.24 Add. To RE $ 409.86 External financing $ 1,000.14

Pro forma balance sheet Current assets $ 4,140.00 Current liabilities Fixed assets 9,085.00 Long-term debt Equity Total $ 13,225.00 Total

$

2,415.00 3,650.00 6,159.86 $ 12,224.86


Sales Costs Taxable income Taxes Net income Payout ratio Tax rate

$ $ $

13,250 9,480 3,770 1,508 2,262 30% 40%

Current assets Fixed assets Total

Output area:

Income statement Sales $ 13,250.00 Costs 9,480.00 Taxable income $ 3,770.00 Taxes 1,508.00 Net income $ 2,262.00 Dividends $ 678.60 Add. To RE 1,583.40 Return on assets Retention ratio Internal growth rate Return on equity Sustainable growth rate 5.78% 70% 4.21% 10.45% 7.89%

Balance sheet Current assets Fixed assets Total

$ $

10,400 Debt 28,750 Equity 39,150 Total

$ $

17,500 21,650 39,150

$

Balance sheet 10,400 Debt 28,750 Equity 39,150 Total

$

17,500 21,650 39,150

$

$


Sales Costs Taxable income Taxes Net income Payout ratio Tax rate

$ $ $

42,000 28,500 13,500 4,590 8,910 30% 34%

Current assets Fixed assets Total

21,000 86,000 $ 107,000

Output area:

Return on equity Retention ratio Sustainable growth rate Maximum increase in sales $

15.91% 70% 12.53% 5,264.03

Debt Equity Total

51,000 56,000 $ 107,000


Sales Costs Taxable income Taxes Net income Dividends Addition to RE Tax rate Increase in sales

$ $ $ $ $

38,000 18,400 19,600 6,664 12,936 5,200 7,736 34% 20%

Output area:

Pro forma income statement Sales $ 45,600.00 Costs 22,080.00 Taxable income $ 23,520.00 Taxes 7,996.80 Net income $ 15,523.20 Dividends $ 6,240.00 Add. To RE $ 9,283.20 Payout ratio 40.20%


Sales

$

38,000 Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock Retained earnings Total Total liabilities and Owners' equity

Current assets Cash $ Accounts Receivable Inventory Total $ Fixed assets Net plant and equipment $

3,050 6,900 7,600 17,550 34,500

Total assets

$

52,050

Output area:

Assets Current assets Cash $ Accounts Receivable Inventory Total $ Fixed assets Net plant and equipment $

HEIR JORDAN CORPORATION Balance Sheet Liabilities and Owners' equ Current liabilities 3,050 8.03% Accounts payable 6,900 18.16% Notes payable 7,600 20.00% Total 17,550 46.18% Long-term debt 34,500 90.79% Owners' equity Common stock Retained earnings Total Total liabilities and Owners' equity

Total assets

$

52,050

136.97%

nt liabilities unts payable

$ $ $

1,300 6,800 8,100 25,000

mmon stock ained earnings

$ $ $

15,000 3,950 18,950 52,050

iabilities and Owners' equity

RATION

Liabilities and Owners' equity nt liabilities unts payable $ 1,300 6,800 $ 8,100 $ 25,000

3.42% n/a n/a n/a

mmon stock ained earnings

$ $ $

15,000 3,950 18,950 52,050

n/a n/a n/a

iabilities and Owners' equity


Sales Costs Cash Accounts receivable Inventory Net plant and equipment Accounts payable Notes payable Long-term debt Common stock Retained earnings Dividends Net income Increase in sales Tax rate

$

38,000 18,400 3,050 6,900 7,600 34,500 1,300 6,800 25,000 15,000 3,950 6,240 15,523 15% 34%

Output area:

Payout ratio Pro forma income statement Sales $ Costs Taxable income $ Taxes Net income $ Dividends $ Add. To RE

0.40

43,700.00 21,160.00 22,540.00 7,663.60 14,876.40 5,980.00 8,896.40

Assets Current assets Cash Accounts Receivable Inventory Total Fixed assets Net plant and equipment

HEIR JORDAN CORPORATION Balance Sheet Liabilities and Owners' equity Current liabilities $ 3,507.50 Accounts payable $ 1,495.00 7,935.00 Notes payable 6,800.00 8,740.00 Total 8,295.00 $ 20,182.50 Long-term debt $ 25,000.00 $ 39,675.00 Owners' equity Common stock Retained earnings Total Total liabilities and Owners' equity

$ 15,000.00 12,846.40 $ 27,846.40 $ 61,141.40

Total assets External financing needed

$ $

59,857.50 (1,283.90)


Return on assets Payout ratio

8% 20%

Output area:

Plowback ratio Internal growth rate

80% 6.84%


Return on equity Payout ratio

15% 25%

Output area:

Plowback ratio Sustainable growth rate

75% 12.68%


Profit margin Capital intensity ratio Debt-equity ratio Net income Dividends

$ $

8.2% 0.75 0.40 43,000 12,000

Output area:

Return on equity Plowback ratio Sustainable growth rate

15.31% 72.09% 12.40%


Total asset turnover Profit margin Equity multiplier Payout ratio

2.50 7.8% 1.80 60%

Output area:

Return on equity Plowback ratio Sustainable growth rate

35.10% 40.00% 16.33%


Percent of capacity Current sales Fixed assets Projected sales

$ $ $

95% 550,000 440,000 630,000

Output area:

Full capacity Maximum sales growth Fixed assets / Full capacity sales Total fixed assets New fixed assets

$

578,947 5.26% 0.7600 478,800

$

$ 38,800.00


Sustainable growth rate Debt/equity ratio Payout ratio Assets/sales

12% 1.20 30% 0.75

Output area:

Plowback ratio Return on equity Profit margin

70% 15.31% 5.22%


Sustainable growth rate Payout ratio Assets/sales ratio Profit margin

11.50% 30.0% 0.60 6.20%

Output area:

Plowback ratio Return on equity Equity multiplier Debt/equity ratio

70% 14.73% 1.43 0.43


Internal growth rate Payout ratio Profit margin

7% 25% 5%

Output area:

Plowback ratio Return on assets Total asset turnover

75% 8.72% 1.74


Profit margin Total asset turnover Total debt ratio Payout ratio

4.8% 1.25 0.65 30%

Output area:

Debt/equity Return on assets Plowback ratio Return on equity Sustainable growth rate

1.86 6.00% 0.7 17.14% 13.64%


Sales Net income Dividends Debt Equity

$ $ $ $ $

195,000 17,500 9,300 86,000 58,000

Output area:

Plowback ratio Return on equity Sustainable growth rate New total assets Debt/equity New total debt Additional borrowing Return on assets Internal growth rate

0.4686 30.17% 16.47% $ 167,710.84 1.48 $ 100,160.64 $ 14,160.64 0.1215 6.04%


Beginning equity Ending TA Net income Dividends

$ $ $ $

135,000 250,000 19,000 2,500

Output area:

Ending equity Plowback ratio ROE (beg. equity) ROE (ending equity) Exact SGR ROE x b (using beg. Equity for ROE) ROE x b (using end Equity for ROE)

$

151,500 86.84% 14.07% 12.54% 12.22% 12.22%

10.89%


Beginning equity Ending TA Net income Dividends

$ $ $ $

135,000 250,000 19,000 2,500

Output area:

Plowback ratio ROA (ending TA) IGR ROA x b (end ROA) Beginning TA Beginning ROA ROA (beginning TA) $

86.84% 7.60% 7.07% 6.60% 233,500 8.14% 7.07%

Chapter 4Questions 25-29 Input area:

For problems 26, 27, and 29, change the percent sales growth rate in the input area below. Sales Costs Other expenses EBIT Interest expense Taxable income Taxes Net income Dividends Add. to retained earnings Sales increase Operating capacity Tax rate $ 929,000 723,000 19,000 187,000 14,000 173,000 60,550 112,450 33,735 78,715 35.00% 80% 35% Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment Liabilities and owners' equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity

$

$ $ $ $

$

25,300 40,700 86,900 152,900

$

413,000

Total assets

$

565,900

Output area:

Dividend payout ratio

0.30 Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment Liabilities and owners' equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity

2009 Pro Forma Income Statement Sales $ 1,254,150 Costs 976,050 Other expenses 25,650 EBIT $ 252,450 Interest expense 14,000 Taxable income $ 238,450 Taxes 83,458 Net income $ 154,993 Dividends $ 46,498 Add. To RE 108,495

$

$

34,155 54,945 117,315 206,415

557,550

Total assets External financing $ 65,770

$

763,965

#25 and #26 Full capacity sales Fixed assets required at full capacity Total fixed assets External financing needed $ (45,740)

$ 1,161,250 0.35565 $ 446,040

#27 and #29 2006 Debt/equity ratio Debt-asset ratio Equity-asset ratio New total debt New LTD Excess debt raised EFN

$ $ $ $

0.75255 0.42940 0.57060 324,648 57,848 (7,922) 65,770 Assets Current assets Cash Accounts receivable Inventory Total Liabilities and owners' equity Current liabilities Accounts payable Notes payable Total Long-term debt

$

$

34,155 54,945 117,315 206,415

Fixed assets Net plant and equipment

$

557,550

Total assets

$

763,965

Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity

Assets Current assets Cash Excess cash Accounts receivable Inventory Total Fixed assets Net plant and equipment

$

$

34,155 (7,922) 54,945 117,315 198,493

Liabilities and owners' equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity

557,550

Total assets Total debt at current D/A Total equity at current D/A Debt repurchase Equity repurchase $ 328,050.00 $ 435,915.00 $ $ (3,401.74) (4,520.25) Assets Current assets Cash Accounts receivable Inventory Total Fixed assets Net plant and equipment

$

756,043

$

$

34,155 54,945 117,315 206,415

Liabilities and owners' equity Current liabilities Accounts payable Notes payable Total Long-term debt Owners' equity Common stock and paid-in surplus Retained earnings Total Total liabilities and owners' equity

557,550

Total assets

$

763,965

#28 Plowback ratio ROA Internal growth rate

0.70 19.87% 16.16%

#29 Plowback ratio ROE Internal growth rate

0.70 34.83% 32.24%

bilities and owners' equity $ 68,000 17,000 $ 85,000 $ 158,000

$ 140,000 182,900 $ 322,900 $ 565,900

bilities and owners' equity $ 91,800 17,000 $ 108,800 158,000

$ 140,000 291,395 $ 431,395 $ 698,195

bilities and owners' equity $ 91,800 17,000 $ 108,800 $ 215,848

$ 140,000 291,395 $ 431,395 $ 756,043


$ 140,000 291,395 $ 431,395 $ 756,043


$ 140,000 295,915 $ 435,915 $ 763,965


Growth rate Debt-equity ratio Profit margin Total assets to sales

12% 0.30 6.70% 1.35

Output area:

Return on equity Plowback ratio Payout ratio

6.45% 1.66 (0.66)

66% This is a negative dividend payout ratio of which is impossible; the growth rate is not consistent with the other constraints. The lowest possible payout ratio is 0, which corresponds to b = 1, or total earnings retention. Maximum sustainable g 6.90%

h is impossible; st possible

Chapter 4Question 31,32 Output area:

External financing needed = Increase in assets - Addition to retained earnings Increase in assets = A X g Addition to retained earnings = (Net income X b) (1 + g) Net income = PM(S) Thus, EFN = A(g) - PM(S)b(1 + g) = A(g) - PM(S)b - [PM(S)b]g = -PM(S)b + [A-PM(S)b]g

Internal growth rate: EFN = 0 = -PM(S)b + [A - PM(S)b]g g = [PM(S)b] / [A - PM(S)b] Since ROA = NI / A = PM(S) / A, dividing numerator and denominator by A gives g = [(PM(S)b) / A] / [(A - PM(S)b) / A] = b(ROA) / [1 - b(ROA)]

retained earnings

nominator by A gives

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FCF 9th Edition Chapter 04