Assignment 2

Note: The assignment is hand written.

Start with the partial model in the file Ch12 P10 Build a Model.xls on the textbook’s Web site,
which contains the 2013 financial statements of Zieber Corporation. Forecast Zeiber's 2014
income statement and balance sheets. Use the following assumptions: (1) Sales grow by 6%. (2)
The ratios of expenses to sales, depreciation to fixed assets, cash to sales, accounts receivable
to sales, and inventories to sales will be the same in 2014 as in 2013. (3) Zeiber will not issue
any new stock or new long-term bonds. (4) The interest rate is 11% for long-term debt and the
interest expense on long-term debt is based on the average balance during the year . (5) No
interest is earned on cash. (6) Dividends grow at an 8% rate. (6) Calculate the additional funds
needed (AFN). If new financing is required, assume it will be raised by drawing on a line of
credit with an interest rate of 12%. Assume that any draw on the line of credit will be made on
the last day of the year, so there will be no additional interest expense for the new line of credit.
If surplus funds are available, pay a special dividend.

Find AFN using the following formula

December 31 Income Statements:

(in thousands of dollars)

2013
Sales $455,150
Expenses (excluding depr. & amort.) $386,878
Depreciation and Amortization $14,565
EBIT $53,708
Interest expense on long-term debt $11,880
Interest expense on line of credit $0
EBT $41,828
Taxes (40%) $16,731
Net Income $25,097
Common dividends (regular dividends) $12,554
Special dividends
Addition to retained earnings (DRE) $12,543
 2013
Assets:
Cash $18,206
Accounts Receivable $100,133
Inventories $45,515
Total current assets $163,854
Fixed assets $182,060
Total assets $345,914

Liabilities and equity

Accounts payable $31,861
Accruals $27,309
Line of credit $0
Total current liabilities $59,170
Long-term debt $120,000
Total liabilities $179,170
Common stock $60,000
Retained Earnings $106,745
Total common equity $166,745
Total liabilities and equity $345,914