Use the following information for Delta Corporation to answer question 1: (20 marks total)
Year
|
20X1
|
20X2
|
Net sales
|
$1,500,000
|
$1,656,598
|
Cost of goods sold
|
675,000
|
745,469
|
Depreciation
|
270,000
|
298,188
|
Interest paid
|
43,600
|
44,000
|
Cash
|
127,500
|
140,811
|
Accounts receivable
|
450,000
|
496,980
|
Inventory
|
525,000
|
579,809
|
Net fixed assets
|
1,800,000
|
1,987,918
|
Accounts payable
|
375,000
|
414,150
|
Notes payable
|
45,000
|
50,000
|
Long-term debt
|
500,000
|
500,000
|
Common stock
|
1,000,000
|
1,000,000
|
Retained earnings
|
982,500
|
1,241,368
|
Tax rate
|
35%
|
35%
|
Dividend payout
|
30%
|
30%
|
1. Delta has 600,000 common shares outstanding. The firm is projecting a 20% increase in net sales for the coming year (20X3). Delta uses the percentage of sales approach to plan for its financing needs. In using this approach, the firm assumes that cost of goods sold, all assets (current and fixed), and accounts payable will all remain a constant percentage of sales. Depreciation expense is assumed to be 15% of net fixed assets, while notes payable and long-term debt will remain at the same level as 20X2. The interest rate charged on notes payable and long-term debt is also expected to remain the same. The firm will aim to maintain its dividend payout of 30% for the foreseeable future.
a. Construct the pro-forma Statement of Comprehensive Income and Statement of Financial Position for Delta Corporation for 20X3. Calculate the external financing needed (EFN) for 20X3. Round all your numbers in the pro-forma statements to the nearest dollar. (4 marks)
