Part B: Financial Planning - Pro Forma Statements 1. Using the financial statements for 2009 as your 'base', assume that Luxio's sales are 20% higher for 2010. Use this projection to prepare the pro forma statements following the requirements listed below. Assume the change in sales is permanent. 2. For the Income Statement: • Cost of Goods Sold rate is expected to remain constant; • 'Depreciation' and 'Interest paid' expenses are expected not to change; • The Tax rate is expected to decrease to 32%; and • Management is expected to increase the amount of dividends paid by 5% (therefore, the Dividend payout rate will increase by 5%). 3. For the Balance Sheet: • 'Current assets' change in direct proportion to sales; • 'Fixed assets' are being operated at 100% of capacity; • 'Accounts payable' changes in direct proportion to sales; . 'Notes payable' and 'Other' current liabilities do not change; • 'Common stock' remains unchanged; and • Use 'Long-term debt' as the plug variable. 4. Determine the amount of External Financing Needed (EFN) under the pro forma assumptions. Detail how this external financing is distributed.

Part B: Financial Planning - Pro Forma Statements 1. Using the financial statements for 2009 as your 'base', assume that Luxio's sales are 20% higher for 2010. Use this projection to prepare the pro forma statements following the requirements listed below. Assume the change in sales is permanent. 2. For the Income Statement: • Cost of Goods Sold rate is expected to remain constant; • 'Depreciation' and 'Interest paid' expenses are expected not to change; • The Tax rate is expected to decrease to 32%; and • Management is expected to increase the amount of dividends paid by 5% (therefore, the Dividend payout rate will increase by 5%). 3. For the Balance Sheet: • 'Current assets' change in direct proportion to sales; • 'Fixed assets' are being operated at 100% of capacity; • 'Accounts payable' changes in direct proportion to sales; . 'Notes payable' and 'Other' current liabilities do not change; • 'Common stock' remains unchanged; and • Use 'Long-term debt' as the plug variable. 4. Determine the amount of External Financing Needed (EFN) under the pro forma assumptions. Detail how this external financing is distributed.

Name: Part B: Financial Planning - Pro Forma Statements1. Using the financi
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Description: Part B: Financial Planning - Pro Forma Statements1. Using the financial statements for 2009 as your 'base', assume that Luxio'ssales are 20% higher for 2010. Use this projection to prepare the pro formastatements following the requirements listed be

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 23PC

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