The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $90 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital. INCOME STATEMENT, 2019 (Figures in $ thousands) Revenue $ 1,800 Fixed costs 90 Variable costs (70% of revenue) 1,260 Depreciation 160 Interest (6% of beginning-of-year debt) 18 Taxable income 272 Taxes (at 35%) 95 Net income $ 177 Dividends $ 89 Addition to retained earnings $ 88 BALANCE SHEET, YEAR-END (Figures in $ thousands) 2019 Assets Net working capital $ 400 Fixed assets 800 Total assets $ 1,200 Liabilities and shareholders’ equity Debt $ 300 Equity 900 Total liabilities and shareholders’ equity $ 1,200 Please solve for the b & c only, I have the first half completed: b. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2020. c. Assume that the balancing item is debt and that no equity is to be issued, what is the projected debt ratio for 2020?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 20P

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The following tables contain financial statements for Dynastatics Corporation. Although the company has not been growing, it now plans to expand and will increase net fixed assets (i.e., assets net of depreciation) by $200,000 per year for the next 4 years, and it forecasts that the ratio of revenues to total assets will remain at 1.50. Annual depreciation is 20% of net fixed assets at the beginning of the year. Fixed costs are expected to remain at $90 and variable costs at 70% of revenue. The company’s policy is to pay out one-half of net income as dividends and to maintain a book debt ratio of 20% of total capital.

INCOME STATEMENT, 2019 (Figures in $ thousands)
Revenue			$	1,800
Fixed costs				90
Variable costs (70% of revenue)				1,260
Depreciation				160
Interest (6% of beginning-of-year debt)				18
Taxable income				272
Taxes (at 35%)				95
Net income			$	177
Dividends	$	89
Addition to retained earnings	$	88

BALANCE SHEET, YEAR-END (Figures in $ thousands)
	2019
Assets
Net working capital	$	400
Fixed assets		800
Total assets	$	1,200
Liabilities and shareholders’ equity
Debt	$	300
Equity		900
Total liabilities and shareholders’ equity	$	1,200

Please solve for the b & c only, I have the first half completed:

b. Now assume that the balancing item is debt and that no equity is to be issued. Prepare a completed pro forma balance sheet for 2020.

c. Assume that the balancing item is debt and that no equity is to be issued, what is the projected debt ratio for 2020?

Here is my work so far in excel:

Revenue	2250
Fixed costs	90
Variable costs @ 70%	1575
Depreciation @ 20%	160
Interest @ 6%	18
Taxable income	407
Tax @ 35%	142.45
Net income	264.55
Dividends @ 1/2	132.275
Retained earnings	132.275

Assests
Net working capital	500	50 % of fixed assets
Fixed assets	1000	increased by 200
Total assets	1500
Laibilities & Shareholders equity
Debt	?	Balancing item
Equity	?
Total Laibilities & Shareholders equity	1500

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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