Table 29.18 shows the 2010 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed Income Statement Revenue $1,785 Fixed costs 53 Variable costs (80% of revenue) 1,428 Depreciation 80 Interest (at 11.8%) 24 Taxes (at 40%) 80 Net income $ 120 Balance Sheet, Year-end 2010 2009 Assets: Net working capital $ 400 $ 340 Fixed assets 800 680 Total assets $1,200 $1,020 Liabilities: Debt $ 240 $ 204 Book equity 960 816 Total liabilities $1,200 $1,020 Sources and Uses Sources: Net income $120 Depreciation 80 Borrowing 36 Stock issues 104 Total sources $340 Uses: Increase in net working capital $ 60 Investment 200 Dividends 80 Total uses $340 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% 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%. a. Construct a model for Executive. b. Use your model to produce a set of financial statements for 2011.

Table 29.18 shows the 2010 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans...

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Table 29.18 shows the 2010 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans to invest a further $200,000 per year in fixed assets for the next five years and net working capital is expected to remain a constant proportion of fixed

Income Statement
Revenue		$1,785
Fixed costs		53
Variable costs (80% of revenue)		1,428
Depreciation		80
Interest (at 11.8%)		24
Taxes (at 40%)		80
Net income		$ 120
Balance Sheet, Year-end
2010	2009
Assets:
Net working capital	$ 400	$ 340
Fixed assets	800	680
Total assets	$1,200	$1,020
Liabilities:
Debt	$ 240	$ 204
Book equity	960	816
Total liabilities	$1,200	$1,020

Sources and Uses
Sources:
Net income	$120
Depreciation	80
Borrowing	36
Stock issues	104
Total sources	$340
Uses:
Increase in net working capital	$ 60
Investment	200
Dividends	80
Total uses	$340

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% 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%.

a. Construct a model for Executive.

b. Use your model to produce a set of financial statements for 2011.

Answered Same Day Dec 24, 2021

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Robert answered on Dec 24 2021

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Table 29.18 shows the 2010 financial statements for the Executive Cheese Company. Annual depreciation is 10% of fixed assets at the beginning of the year, plus 10% of new investment. The company plans...

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