The following tables summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio...


The following tables summarizes the 2019 income statement and end-year balance sheet of Drake’s Bowling Alleys. Drake’s financial manager forecasts a 10% increase in sales and costs in 2020. The ratio of sales to average assets is expected to remain at 0.40. Interest is forecasted at 5% of debt at the start of the year.



























































INCOME STATEMENT, 2019
(Figures in $ thousands)
Sales$1,600(40% of average assets)a
Costs1,200(75% of sales)
Interest32(5% of debt at start of year)b
Pretax profit$368
Tax147(40% of pretax profit)
Net income$220


a Assets at the end of 2018 were $3,900,000.



b Debt at the end of 2018 was $650,000.






















































BALANCE SHEET, YEAR-END
(Figures in $ thousands)
Assets$4,100Debt$650
Equity3,450
Total$4,100$4,100



a. What is the implied level of assets at the end of 2020?(Do not round your intermediate calculations. Enter your answer in thousands.)



b. If the company pays out 50% of net income as dividends, how much cash will Drake's need to raise in the capital markets in 2020?(Do not round your intermediate calculations. Enter your answer in thousands.)



c.If Drake's is unwilling to make an equity issue, what will be the debt ratio at the end of 2020?(Do not round your intermediate calculations. Round your answer to 2 decimal places.)




Jun 04, 2022
SOLUTION.PDF

Get Answer To This Question

Related Questions & Answers

More Questions »

Submit New Assignment

Copy and Paste Your Assignment Here