How does r and es projected external financing required

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Reference no: EM13892265

An Excel spreadsheet containing R&E Supplies' 2012 pro forma finan- cial forecast as shown in Table 3.5 is available for download at www.mhhe.com/higgins10e. (Select Student Edition > Choose a Chapter > Files.) Using this spreadsheet, the information presented in the following list of figures, and the modified equations determined earlier in question 6, extend the forecast for R&E Supplies contained in Table 3.5 through 2013.

R&E Supplies Assumptions for 2013 ($ thousands)

Growth rate in net sales

30.0%

Tax rate

45.0%

Cost of goods sold/net sales

86.0%

Dividend/earnings after tax

50.0%

Gen., sell., & admin.

 

Current assets/net sales

29.0%

expenses/net sales

11.0%

Net fixed assets

$270

Long-term debt

$560

Current liabilities/net sales

14.4%

Current portion long-term debt

$100

 

 

Interest rate

10.0%

 

 

a. What is R&E's projected external financing required in 2013? How does this number compare to the 2012 projection?

b. Perform a sensitivity analysis on this projection. How does R&E's projected external financing required change if the ratio of cost of goods sold to net sales declines from 86.0 percent to
84.0 percent?

c. Perform a scenario analysis on this projection. How does R&E's projected external financing required change if a severe recession occurs in 2013? Assume net sales decline 5 percent, cost of goods sold rises to 88 percent of net sales due to price cutting, and current assets increase to 35 percent of net sales as management fails to cut purchases promptly in response to declining sales.

Reference no: EM13892265

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