Jim's Espresso Income Statement and Balance Sheet

Income Statement:
Sales
Costs except Depr.
EBITDA
Depreciation
EBIT
Interest Expense (net)
Pretax Income
Income Tax
Net Income

200,000
(100,000)
100,000
(6,000)
94,000
(400)
93,600
(32,760)
60,840

ance Sheet
Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Inventories
Total Current Assets
Property Plant and Equipment
Total Assets

15,000
2,000
4,000
21,000
10,000
31,000

Liabilities and Equity

Accounts Payable
Debt
Total Liabilities
Stockholders' Equity
Total Liabilities and Equity

1,500
4,000
5,500
25,500
31,000

Q1
Jim's expects sales to grow by 10% next year. Using the percent of sales method, forecast:
Next year's forecasted sales:
a. Costs
b. Depreciation

$220,000
$110,000 50% of sales
$6,600 3% of sales

c. Net Income

$66,924 30.42% of sales

d. Cash

$16,500 7.5% of sales

e. Accounts Receivable

$2,200 1% of sales

f. Inventory

$4,400 2% of sales

g. Property, Plant and Equipment

$11,000 5% of sales

Q2
Assume that Jim's pays out 90% of its net income. Use the percent of sales method to forecast:

a. Stockholder's Equity

Last year's
Amount added
$25,500
$6,692

b. Accounts Payable

Percent of sales: Forecasted:

0.75%
$1,650

Q3
What is the amount of net new financing needed for Jim's?
Income Statement:
Sales
Costs except Depr.
EBITDA
Depreciation
EBIT
Interest Expense (net)
Pretax Income
Income Tax

220,000
-110,000
110,000
-6,600
103,400
-440
102,960
-36,036

Net Income

66,924

The net new financing needed for Jim's is actually negative they have excess cash that they can use to repay debt.

les method, forecast:

Refer to the tab labeled "Jim's

Espresso Financials" for all of
the problems on this worksheet.

sales method to forecast:

Forecasted amount
$32,192

Balance Sheet
Assets
Cash and Equivalents
Accounts Receivable
Inventories
Total Current Assets
Property Plant and Equipment
Total Assets

16,500
2,200
4,400
23,100
11,000
34,100

Liabilities and Equity

Accounts Payable
Debt
Total Liabilities
Stockholders' Equity
Total Liabilities and Equity

1,650
4,000
5,650
32,192
37,842

Net new financing:

(3,742)

Net new financing:

ve excess cash that they can use to repay debt.

(3,742)

Q4

Assume that KMS' market share will increase by 0.25% per year rather than the 1% used in the chapter (see Table 18.5)
and that its prices remain as in the chapter. What production capacity will KMS require each year? When will an
expansion become necessary (when will production volume exceed 1100)?

2013

2014

2015

2016

2017

Market Size

10,000

10,500

11,025

11,576

12,155

Market Share

10.00%

10.25%

10.50%

10.75%

11.00%

1,000

1,076

1,158

1,244

1,337

$74.89

$76.51

$78.04

$79.60

$81.19

Production Volume (000 units)

Production Volume
Additional Market Information
Average Sales Price:
They will need to expand production capacity in 2015.

Q5

Under the assumption that KMS' market share will increase by 0.25% per year, you determine that the plant will require an
expansion in 2015. The expansion will cost $20 million. Assuming the financing of the expansion will be delayed
accordingly, calculate the projected interest payments (assuming that the KMS still uses a 10-year bond and interest rates
remain the same as in the chapter) through 2018.

Debt and Interest Table ($000s)

Outstanding Debt
New Net Borrowing
Interest on Debt (6.8%)

2013

2014

2015

2016

2017

4,500

4,500

24,500

24,500

306

306

4,500
20,000
306

1,666

1,666

Q6

Under the assumption that KMS' market share will increase by 0.25% per year, you project the following depreciation:

2013

2014

2015

2016

2017

Depreciation

5,492

5,443

7,398

7,459

7,513

Using this information, project net income through 2018 (that is, reproduce Table 18.8 under the new assumptions).
2013
Income Statement ($000)
1 Sales
2 Cost of Goods Sold
3 EBITDA
4 Depreciation
5 EBIT
6 Interest Expense
7 Pretax Income
8 taxes (35%)
9 Net Income

2014

2015

2016

2017

74,890
82,344
90,341
99,056 108,555
(58,414) (64,228) (70,466) (77,264) (84,673)
16,476
18,116
19,875
21,792
23,882
(5,492) (5,443) (7,398) (7,459) (7,513)
10,984
12,673
12,477
14,333
16,369
(306)
(306)
(306) (1,666) (1,666)
10,678
12,367
12,171
12,667
14,703
(3,737) (4,328) (4,260) (4,434) (5,146)
6,941
8,038
7,911
8,234
9,557
sum of net income of 6 years

er (see Table 18.5)

When will an

2018
12,763
11.25%
1,436
$82.82

e plant will require an

will be delayed
nd and interest rates

2018
24,500
1,666

wing depreciation:

2018

7,561
assumptions).
2018
118,916
(92,755)
26,162
(7,561)
18,601
(1,666)
16,935
(5,927)
11,007
51,688