The following tables summarize the 2022 income statement and end-year balance sheet of Drake'sBowling Alleys. Drake's financial manager forecasts a 20% increase in sales and costs in 2023. Theratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 4% of debt atthe start of the year.SalesCostsInterestPretax profitTaxNet incomeAssetsTotalINCOME STATEMENT, 2022(Figures in $ thousands)$ 1,30078020aAssets at the end of 2021 were $2,500,000.b Debt at the end of 2021 was $510,000.$ 500150$ 350(50% of average assets)(60% of sales)(4% of debt at start of year)b(30% of pretax profit)BALANCE SHEET, YEAR-END 2022(Figures in $ thousands)$ 2,700$ 2,700a. Implied level of assetsb. Additional cashc. Debt ratioDebtEquity$ 5102,190$ 2,700a. What is the implied level of assets at the end of 2023?Note: Round your intermediate calculations to the nearest whole dollar amount. Enter youranswer in thousands.b. If the company pays out 50% of net income as dividends, how much cash will Drake's need toraise in the capital markets in 2023?Note: Round your intermediate calculations to the nearest whole dollar amount. Enter youranswer in thousands.c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2023?Note: Round your intermediate calculations to the nearest whole dollar amount. Round youranswer to 2 decimal places.

Debt Ratio is a financial metric that assesses a company's leverage by comparing its total debt to…

The following tables summarize the 2022 income statement and end-year balance sheet of Drake's Bowling Alleys. Drake's financial manager forecasts a 20% increase in sales and costs in 2023. The ratio of sales to average assets is expected to remain at 0.50. Interest is forecasted at 4% of debt at the start of the year. Sales. Costs Interest Pretax profit Tax Net income Assets Total INCOME STATEMENT, 2022 (Figures in $ thousands) $ 1,300 780 20 a Assets at the end of 2021 were $2,500,000. b Debt at the end of 2021 was $510,000. $500 150 $ 350 a. Implied level of assets b. Additional cash c. Debt ratio (50% of average assets) a (60% of sales) (4% of debt at start of year) b (30% of pretax profit) BALANCE SHEET, YEAR-END 2022 (Figures in $ thousands) $ 2,700 $ 2,700 Debt Equity $ 510 2,190 $ 2,700 a. What is the implied level of assets at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Enter your answer in thousands. c. If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2023? Note: Round your intermediate calculations to the nearest whole dollar amount. Round your answer to 2 decimal places.

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter4: Financial Planning And Forecasting

Section: Chapter Questions

Problem 7P