Question - Master Chemicals is planning its financing needs for the next 5 years. The balance sheet for the year 2015 and 2016 and the income statement for the year 2016 are as shown below:
|
|
2016
|
2015
|
|
Net working capital
|
 190
|
140
|
|
Fixed Assets:
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|
|
|
Gross Fixed Assets
|
350
|
320
|
|
Less accumulated depreciation
|
100
|
80
|
|
Net Fixed Assets
|
250
|
240
|
|
Total Net Assets
|
440
|
380
|
|
|
|
|
|
Long term debt
|
90
|
60
|
|
Net worth (Paid up capital plus retained earnings)
|
350
|
320
|
|
Long term Liabilities and Net Worth
|
 440
|
 380
|
|
|
2016
|
|
Revenues
|
2200.00
|
|
Costs
|
2055.00
|
|
Depreciation
|
20.00
|
|
EBIT
|
125.00
|
|
Interest
|
5.00
|
|
Tax
|
60.00
|
|
Net Income
|
60.00
|
The manager has forecast the following:
The sales are expected to increase by 20% every year for years 2017, 2018, 2019, 2020 and 2021
The costs will be 92% of the revenue
Depreciation will be 9% of net fixed assets at start of the year
Dividend will be 60% of net income
Net working capital will be 11% of revenues
Investment in net fixed assets will be 12.5% of revenues
Tax rate is 50%
All additional capital needed will be financed through debt
Interest will be charged at 10% of long term debt at the beginning of the year
(a) Prepare the Pro forma income statement for years 2017 to 2021.
(b) Estimate the additional financing required for each of the 5 years.
(c) Prepare the Pro forma balance sheet for years 2017 to 2021.