Construct uptons pro forma balance sheet for december 31

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Reference no: EM131376042

Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, and ships them to its chain of retail stores. Upton's balance sheet as of December 31, 2006, is shown here (millions of dollars):

Cash	$3.5	Accounts Payable	$9.0
Receivables	26.0	Notes payable	18.0
Inventories	58.0	Accruals	8.5
Total current assets	$87.5	Total current liabilities	$35.5
Net fixed assets	35.0	Mortgage Loan	6.0
		Common stock	15.0
		Retained earnings	66.0
Total assets	$122.5	Total liabilities and equity	$122.5

Sales for 2006 were $350 million, while net income for the year was $10.5 million. Upton paid dividends of $4.2 million to common stockholders. The firm is operating at full capacity. Assume that all ratios remain constant.

a. If sales are projected to increase by $70 million, or 20 percent, during 2007, use the AFN equation to determine Upton's projected external capital requirements.

b. Construct Upton's pro forma balance sheet for December 31, 2007. Assume that all external capital requirements are met by bank loans and are reflected in notes payable. Assume Upton's profit margin and dividend payout ratio remain constant.

Reference no: EM131376042

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