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# Exbihit 4 data

A0* = Assets at 1998. All assets were needed for 1998 sales
S0 = 1998 Sales
1998 Net Income
1998 Dividends
L0* = 1998 payables + accruals, which increase spontaneously with sales
Part II. Data Used in the AFN Equation: 1998 Ratios Held Constant
AFN = Additional Funds Needed to buy assets needed to support growth. AFN is in
addition to funds raised internally, i.e., AFN represents required external funds.
g = Target growth rate in sales.

## S1 = 1998 Sales = (1+g)(S0) = (1.1)(\$3,000)

S = Growth in sales = S1 - S0 = \$3,300 - \$3,000. Can also be found as S = g(S0)
L0*/S0 = Spontaneously generated funds per dollar of new sales. When multiplied by
S, we find the new payables and accruals that are available to support growth.
M = Profit margin on sales = 1997 net income/S 0 = \$117.5/\$3,000. Multiply by S1 (not
S0) to find the net income available in 1998 for dividends or growth.
RR = Retention Rate = (1 Dividend Payout Ratio) = (1 Dividends/Net Income) =
Part III. The AFN Equation
Required increase
in assets

(A0*/S0)S

0.6667(\$300)

\$281

AFN =

AFN =

\$200 million

Spontaneous
increase in
Payables and
Accruals
(L0*/S0)S
0.0667(\$300)
\$28

## Funds obtained as new

Retained Earnings. Based on
2009 Sales
MS1(RR)
0.0392(\$3,300)(0.5106)
\$53

1998
\$1,875
\$4,800
\$95.0
\$0.0
\$47

Data
8.79%

0.6667
\$5,222
\$422

0.0667

0.0198

0.5106

## Funds obtained as new

Retained Earnings. Based on
2009 Sales
MS1(RR)
0.0392(\$3,300)(0.5106)
\$53

## Exhibit 4 data for 1998 and exhbit 3 for 1997

Part I. Inputs
Growth rate, g
Operating costs / Sales
Receivables/Sales
Inventories/Sales
Debt ratio
Payout ratio

1997
1998
NA
10%
90.54%
90.54%
12.50%
12.50%
20.50%
20.50%
53.0%
53.0%
48.94%
48.94%

## Part II. Income Statements

Sales
Operating costs (includes depreciation)
Earnings Before Interest and Taxes (EBIT)
Less interest expense
Earnings Before Taxes (EBT)
Taxes
Net income (NI)
Dividends

## Part III. Balance Sheets

Assets
Cash
Accounts receivable
Inventories
Fixed Assets (grow with sales)
Total Assets

1998
Industry
Fixed Inputs:
NA
Tax rate (T)
40%
87.00%
Interest rate
10.00%
9.86% Shares out'ing
50
9.17% Price per share
\$23.06
40.0%
FA/Sales
7.60%
45.0%
1997(exhibit 3)
\$4,412,191.0
171,187.0
\$4,241,004.0
56,259.0
\$4,184,745.0
18,036.0
\$4,166,709.0
\$0.0
\$4,166,709.0
2008
\$51,248.0
\$623,362.0
\$826,228.0
\$365,180.0
\$1,866,018.0

Change
(1+ g)
0.905
See notes
EBT(T)
NI(Payout)

Change
(1+ g)
0.1250
0.2050
(1+ g)

1998(exhibit 4)
\$4,800,000.0
\$1,344,000.0
\$3,456,000.0
74,000.0
\$3,382,000.0
61,000.0
\$3,321,000.0
\$0.0
\$3,321,000.0
1998
\$50,000.0
\$620,000.0
\$826,000.0
\$365,000.0
\$1,861,000.0

## Liabilities and Equity

Payables + Accruals (both grow with sales)
Short term bank loans
Total current liabilities.
Long term bonds
Total debt
Common stock
Retained earnings
Total common equity
Total Liabilities and Equity

\$394,457.0
(1+ g)
\$0.0
See notes
\$394,457.0
\$176,522.0
See notes
\$570,979.0
\$103,250.0
See notes
\$892,396.0 \$3,321,000.0
\$995,646.0
\$1,566,625.0

\$544,000.0
\$0.0
\$544,000.0
\$189,000.0
\$733,000.0
\$401,000.0
\$4,213,396.0
\$4,614,396.0
\$5,347,396.0

## Part IV. Ratios and EPS

Operating costs/Sales
Receivables/Sales
Inventory/Sales
Debt ratio
Payout ratio
Total assets turnover
Assets/Equity (equity multiplier)
Times interest earned (TIE)
Profit margin
Return on assets (ROA)
Return on equity (ROE)
DuPont Calculations

1997
3.88%
14.13%
18.73%
30.60%
0.00%
2.36
1.87
75.38
94.44%
223.29%
418.49%
Profit
Margin
(NI/S)

1998E
28.00%
12.92%
17.21%
39.39%
0.00%
2.58
0.40
46.70
69.19%
178.45%
71.97%
Total Assets
Turnover
(S/A)

Equity
Multiplier
(Assets/
Equity)
1.87
0.40
1.67
\$256.21

Actual 1997
94.44%
2.36
Forecasted for 1998
69.19%
2.58
Industry average data
5.00%
1.80
Earnings per share (EPS)
\$83,334.18
Part V. Notes on Calculations
Assets in 1998 will change to this amount, from the balance sheet
Target debt ratio
Resulting total debt: (Target ratio)( 1998 Assets)
Less: Payables and accruals
Bank loans and bonds (= Interest-bearing debt)
Allocated to bank loans, based on 1997 proportions
Allocated to bonds, based on 1997 proportions
Interest expense: (Interest rate)(1998 bank loans plus bonds)
Target equity ratio = 1 Target debt ratio
Required total equity: (1998 Assets)(Target equity ratio)
Retained earnings, from 1998 balance sheet
Required common stock = Required equity Retained earnings
Old shares outstanding (millions)
Increase in common equity = 1998 Equity 1997 Equity
Initial price per share from input section
Change in shares = Change in equity/Initial price per share
New shares outstanding = Old shares + Shares
Old EPS = 1997 Net income / Old shares outstanding
New EPS = 1998 Net income / New shares outstanding

Industry
87.00%
9.86%
9.17%
40.00%
45.00%
1.80
1.67
6.00
5.00%
9.00%
15.00%
= ROE
418.5%
72.0%
15.0%

0.00%
100.00%

\$1,861,000.0
53%
\$986,330.0
-\$544,000.0
\$442,330.0
\$0.0
\$442,330.0
\$44,233.0
47%
\$874,670.0
\$4,213,396.0
-\$3,338,726.0
50
\$297,750.0
\$23.06
12,911.97
12,961.97
\$83,334.18
\$256.21