Can someone direct me on how to proceed? Please explain why. I have
to learn how to proceed with a problem like this.
Question #2
Income Statement Sources and Uses of Funds
Revenue $1785 Sources:
Fixed Costs 53 Operating cash flow $200
Variable Cost $1428 Borrowing 36
(80% of revenue) Stock issues 104
Depreciation 80 Total Sources $340
Interest 24
(at 11.8%) Uses:
Tax (at 40%) 80 Increase in net working capital $60
Net Income $120 Investment $200
Dividends 80
Total uses $340
Balances Sheet, Year-end 2004 2005
Assets:
Net working capital $400 $340
Fixed assets 800 680
Total assets $1200 $1020
Liabilities:
Debt $240 $204
Book equity 960 816
Total Liabilities $1200 $1020
The 2004 financial statements for the Executive Cheese Company. Annual
depreciation is 10 percent of fixed assets at the beginning of the
year, plus 10 percent of new investment. The company plans to invest a
further $200 per year in fixed
assets for the next five years and net working capital is expected to
remain a constant
proportion of fixed assets. The company forecasts that the ratio of
revenues to total assets
at the start of each year will remain at 1.75. Fixed costs are
expected to remain at
$53, and variable costs, at 80 percent of revenue. The company?s
policy is to pay out
two-thirds of net income as dividends and to maintain a book debt
ratio of 20 percent.
1) Construct a model for Executive Cheese.
2) Use your model to produce a set of financial statements for 2005.
 I could use some help again...
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Finance #2