Problem Set on Financial Planning and Forecasting1. Last yearâ??s balance sheet and income statement


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Problem Set on Financial Planning and Forecasting1. Last year’s balance sheet and income statement for the Lewis Company are shown below. The firm operated at full capacity. It expects sales to increase by 20 percent during this year and expects this year’s dividends per share to increase to $1.10.a. Use percent of sales method (i.e., constant ratio method) to determine how much outside financing is required, developing the firm’s pro forma balance sheet and income statement, and use the AFN as the balancing item.b.If the firm must maintain a current ratio of 2.3 and a debt ratio of 40 percent, how much financing will be obtained using notes payable, long-term debt, and common stock?Balance SheetCash80Accounts receivable240Inventory720Net fixed assets3,200Total assets 4,240Accounts payable160Notes payable252Accruals40Long-term debt1,244Common stocks1,605Retained earnings939Total liabilities and equity4,240Income StatementSales8,000Operating costs7,450EBIT550Interest expense150EBT400Taxes @ 400Net income240Per Share DataShare price16.96Earnings per share (EPS)1.60Dividends per share (DPS)1.04