BUSINESS COLLEGE

Consider the following simplified financial statements for the Wims Corporation (assuming no income taxes):Income Statement Balance Sheet
Sales $38,000 Assets $27,300 Debt $6,700
Costs 32,600 Equity 20,600
Net income $5,400 Total $27,300 Total $27,300

The company has predicted a sales increase of 20 percent. Assume the company pays out half of net income in the form of a cash dividend. Costs and assets vary with sales, but debt and equity do not.

a. Prepare the pro forma statements.
b. Determine the external financing needed.

Answers

Answer 1

Answer:

Answer and Explanation:

a. Proforma income statement

Sales $45,600

Costs $39,120

Net income $6,480

b. Proforma balance sheet

Particulars Amount Liabilities Amount

Assets $32,760 Debt $8,950

Equity $23,810

Total $32,760

External finance = Predicted debt - Beginning debt

= $7,585 - $6,700

= $885

Working note:-

For pro forma statements:

Sales = $38,000 × (1 + 0.20)

= $38,000 × 1.20

= $45,600

Costs = 32,600 × (1 + 0.20)

= $32,600 × 1.20

= $39,120

Net income = Sales - Costs

= $45,600 – 39,120

= $6,480

Assets = 27,300 × (1 + 0.20)

= 27,300 × 1.20

= $32,760

Equity = Beginning balance + Net income - Dividend

= $20,600 + $6,480 - ($6,480 × 1 ÷ 2)

= $20,600 + $6,480 - $3,240

= $23,810

Debt = Assets - Equity

= $31,760 - $23,810

= $8,950

Answer 2

Answer:

Final answer:

The pro forma statements are prepared by adjusting the sales, costs, and assets by the 20% increase. The net income and dividends are then calculated. The external financing needed is found by deducting the sum of debt, equity and retained earnings from the adjusted total assets.

Explanation:

The pro forma statements are prepared by first adjusting sales, costs, and assets by the predicted increase of 20%. The new sales amount would be $38,000 * 1.20 = $45,600. Costs increase at the same rate, so the new costs would be $32,600 * 1.20 = $39,120. The new assets would be $27,300 * 1.20 = $32,760.

On the pro forma income statement, the net income is calculated by subtracting the new costs from the new sales, which is $45,600 - $39,120 = $6,480. The dividend would be $6,480 * 0.50 = $3,240. The retained earnings (AKA addition to retained earnings) increase by the net income minus the dividends, which is $6,480 - $3,240 = $3,240.

On the pro forma balance sheet, the total assets increased to $32,760. As debt and equity don't change, then they remain at $6,700 and $20,600 respectively. The sum of debt and equity added to the predicted retained earnings is $6,700 + $20,600 + $3,240 = $30,540. Therefore, the external financing needed is the new total assets minus this sum, which is $32,760 - $30,540 = $2,220.

Learn more about Pro Forma Statements here:

brainly.com/question/33974992

#SPJ3

Related Questions

In which of the following situations could a research analyst use multiple regression? A real estate development company wants to estimate the probable sales of construction services on the basis of marriage rates, population movement in the region, and interest rates on construction loans A psychologist wants to understand the underlying personality factors associated with materialism in consumers A firm wants to identify segments of the market to pursue The brand manager for Tide laundry detergent wants to understand how consumers perceive Tide relative to other laundry detergents All of the above Question 2
Corporation needs to raise $70 million to finance its expansion into new markets. The company will sell new shares of equity via a general cash offering to raise the needed funds. The offer price is $30 per share and the company’s underwriters charge a spread of 8 percent. If the SEC filing fee and associated administrative expenses of the offering are $575,000, how many shares need to be sold? (Do not round intermediate calculations and enter your answer in shares, not millions of shares, rounded to the nearest whole number, e.g., 1,234,567.)
Gator Corporation manufactures several types of accessories. For the year, the gloves and mittens line had sales of $489,000, variable expenses of $360,000, and fixed expenses of $140,000. Therefore, the gloves and mittens line had a net loss of $11,000. If Gator eliminates the line, $35,000 of fixed costs will remain. Prepare an analysis showing whether the company should eliminate the gloves and mittens line. (Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).) Continue Eliminate Net Income Increase (Decrease) Sales $ $ $ Variable costs Contribution margin Fixed costs Net income / (Loss) $ $ $ The analysis indicates that Gator should the gloves and mittens line.
A client has an options account that is qualified to buy options and sell covered calls. The client calls his representative, telling him that he wants to sell naked calls in the account. Which statement is TRUE about this?A. The representative can do this without taking any further actionB. The "Special Statement for Uncovered Options Writers" must be provided before executing the transactionC. The "Options Disclosure Document" must be provided before executing the transactionD. The representative must open a separate options account for the customer and segregate the resulting naked options positions
Which of the following is an example of physical capital in an economy?A. A cargo plane B. A pilot C. A traveler D. A mechanic

Estimating Share Value Using the DCF Model Following are forecasts of Whole Foods sales, net operating profit after tax (NOPAT), and net operating assets (NOA) as of September 25, 2016.Reported Horizon Period

$ millions 2016 2017 2018 2019 2020 Terminal Period

Sales $15,724 $15,881 $16,199 $16,523 $16,853 $17,022

NOPAT 526 524 535 545 556 562

NOA 3,466 3,500 3,570 3,642 3,715 3,752

Answer the following requirements assuming a discount rate (WACC) of 6%, a terminal period growth rate of 1%, common shares outstanding of 318.3 million, and net nonoperating obligations (NNO) of $242 million.

(a) Estimate the value of a share of Whole Foods' common stock using the discounted cash flow (DCF) model as of September 25, 2016.

Rounding instructions:

Round answers to the nearest whole number unless noted otherwise. Use your rounded answers for subsequent calculations.

Do not use negative signs with any of your answers.

Reported Forecast Horizon

($ millions) 2016 2017 2018 2019 2020 Terminal Period

Increase in NOA Answer Answer Answer Answer Answer

FCFF (NOPAT - Increase in NOA) Answer Answer Answer Answer Answer

Discount factor [1 / (1 + rw)t ] (Round 5 decimal places) Answer Answer Answer Answer

Present value of horizon FCFF Answer Answer Answer Answer

CUMULATIVE present value of horizon FCFF $ Answer

Present value of terminal FCFF Answer

Total firm value Answer NNO Answer

Firm equity value $ Answer

Shares outstanding (millions) Answer (Round one decimal place)

Stock price per share $ Answer (Round two decimal places)

(b) Whole Foods stock closed at $30.96 on November 18, 2016, the date the 10-K was filed with the SEC. How does your valuation estimate compare with this closing price? What do you believe are some reasons for the difference?

A. Stock prices are a function of many factors. It is impossible to speculate on the reasons for the difference.

B. Our stock price estimate is only a few cents lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is accurately priced. Our stock price estimate is lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is overvalued.

C. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions.

D. Our stock price estimate is lower than the Whole Foods market price, indicating that we believe that Whole Foods stock is undervalued. Stock prices are a function of expected NOPAT and NOA, as well as the WACC discount rate. Our lower stock price estimate might be due to more optimistic forecasts or a lower discount rate compared to other investors' and analysts' model assumptions.

Answers

Answer:

Check the explanation for the answer

Explanation:

The price been estimated is bit lower than trading price

The price of the stock is also bit lower with the cents than the whole Foods market price, this indicate that we agree that Whole Foods stock is fixed priced.

Further calculations are been done in the file attached using excel

Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending. According to the model of aggregate demand and aggregate supply, what happens to prices and employment in the short run

Answers

Answer:

prices rise, employment rises.

Explanation:

In the starting equilibrium price, there would be more demand that result in fall in the firm inventory. Now in order to maintain the level of the inventory the firm would have to rise the production for this the firm should hire more wokers due to this the employment would rise also the wages are more paid as compared to before so it increase the production cost that results in rise in price

Therefore the above represent the answer

1. The roles of money Antonio just graduated from college and is now in the market for a new car. He has saved up $4,000 for a down payment. He's deciding between a Super and a Duper. The Super is priced at $23,599, and the Duper is priced at $18,999. After agonizing over the decision, he decides to buy the Duper. He writes the dealership a check for $4,000 and takes out a loan for the remainder of the purchase price.

Answers

Answer:

Explanation:

Antonio used the value of money as a unit of account to compare the value of the two cars namely Super and Duper and come to the conclusion that Duper was cheaper to Super

Antonio saved $ 4000 in his checking account which he gave to the seller. This represent money's role as a store of value

Antonio write a check of the money he saved to the seller and the seller accepted it and gave him the car which fulfill the role of money as a medium of exchange.

Dana, who is a trained yoga instructor, spends 4 hours on Monday baking and packing 10 boxes of cookies. She sells the cookies for $10 a box. Given that she can also teach yoga for $80 an hour, what is her opportunity cost of baking cookies?A. $220 B. $800 C. $320 D. $420 E. $100

Answers

Answer:

c. $320

Explanation:

Opportunity cost is an economic term for expressing cost in terms of forgone alternatives. The opportunity cost of Dana is calculated as;

Hours spent baking cookies = 4 hours, the amount earned per hour when Dana is working as yoga instructor = $80.

Therefore, the total opportunity cost of Dana, when she is baking is cookies;

= 4 hours × $80

= $320.

Breon works as a clerk in the human resources department for her company for which she receives an hourly rate of $6.50. Occasionally she fills in for the receptionist at the front desk and receives a $1.50 per hour differential. During a weekly pay period, she worked 31 hours in the human resources department and 9 hours at the front desk. What is Breon's gross pay for the week

Answers

Breon's gross pay for the week is $273.5

Hourly rate for the company = $6.50

Number of hours in the human resource department = 31 hours

Hourly rate at her regular job = $6.5

hours at the front desk = 9 hours

hours at the front desk = 9 hours

rate at the front desk = $1.50

The gross pay =

$6.5 * 31 + 6.5*9 + 9*1.5

= 273.5 dollars

Breon's gross pay is therefore 273.5 dollars

What is gross pay?

This is the total amount of money that an employee of a company would receive as payment before their taxes and other deductions are removed.

Answers

Answer:

a. estimate the cost of inventory from incomplete records.

Explanation:

The gross profit method is used to estimate the cost of inventory from incomplete records. This is done by determining the amount of gross profit using the Sales Revenue and the Gross Profit Margin. Then finding the difference between the Cost of Goods available for sale and this Gross Profit to reach to the estimated cost of inventory.

Other Questions

An important function of the U.S. Federal Reserve is to a. set the debt ceiling. b. control the supply of money. c. mint coins. d. fund Congressional spending.

Kirnon Clinic uses client-visits as its measure of activity. During July, the clinic budgeted for 3,650 client-visits, but its actual level of activity was 3,590 client-visits. The clinic has provided the following data concerning the formulas to be used in its budgeting: Fixed element per monthVariable element per client-visit Revenue - $39.90 Personnel expenses$35,900 $11.10 Medical supplies 1,900 7.90 Occupancy expenses 8,900 1.90 Administrative expenses 5,900 0.10 Total expenses$52,600 $21.00 The activity variance for administrative expenses in July would be closest to: Multiple Choice $66 F $6 U $66 U $6 F

Larkspur, Inc. uses a periodic inventory system. Its records show the following for the month of May, in which 80 units were sold. Date Explanation Units Unit Cost Total Cost May 1 Inventory 34 $9 $306 15 Purchase 26 10 260 24 Purchase 40 11 440 Total 100 $1,006 Calculate the weighted-average unit cost. (Round answer to 3 decimal places, e.g. 5.125.) Weighted-average unit cost $Enter the Weighted-average unit cost in dollars eTextbook and Media Calculate the ending inventory at May 31 using the FIFO, LIFO and average-cost methods. (Round answers to 0 decimal places, e.g. 125.) FIFO LIFO AVERAGE-COST The ending inventory at May 31 $Enter a dollar amount $Enter a dollar amount $Enter a dollar amount

What is the effect of contractionary fiscal policy in the short run?