Managerial Finance- Week 2 Project the right one

New England Corporation 2018 2019 2020 2021 2022 Assumed Pro forma financial statements Actual Actual Actual Actual Pro forma % of Sales Assumptions Sales growth rate 25.88% 20.78% 23.33% Tax rate 45.4% 51.5% 40.14% 45.66% Dividend payout rate 37.9% 51.17% 38.50% 42.51% Interest rate (short-term debt) 6.30% 6.50% 7.15% 7.15% Interest rate (long-term debt) 5.30% 5.50% 5.96% 5.96% Income Statement ($ millions) Sales $62.498 $78.673 $95.023 $117.193 Cost of goods sold 40.121 52.578 63.186 77.162 65.84% SG&A expense 5.578 7.135 8.241 10.417 8.89% Depreciation expense 3.268 4.298 6.106 6.687 5.71% EBIT $13.531 $14.662 $17.490 $22.928 Interest expense 3.258 4.870 7.354 12.561 Pre-tax income $10.273 $9.792 $10.136 $10.367 Taxes 4.663 5.038 5.092 4.734 Net income $5.609 $4.753 $5.044 $5.633 6.78% Allocation of net income: Dividends $2.124 $2.432 $2.921 $2.395 Addition to retained earnings $3.486 $2.321 $2.123 $3.238 Balance Sheet ($ millions) ASSETS Current assets Cash and marketable securities $2.861 $5.275 $6.105 $7.916 $9.583 8.18% Accounts receivable 13.789 14.341 17.276 22.854 $26.938 22.99% Inventory 17.909 22.402 24.623 30.991 $38.969 33.25% Total current assets $34.559 $42.017 $48.004 $61.761 $75.489 Gross PPE 222.199 284.026 337.593 410.898 514.083 438.66% Accumulated depreciation 66.142 69.410 73.708 79.814 86.501 Net PPE $156.056 $214.616 $263.885 $331.083 $427.582 Total assets $190.615 $256.634 $311.889 $392.844 $503.072 LIABILITIES AND EQUITY Current liabilities Accounts payable $21.326 $48.500 $56.173 $63.250 $84.210 71.86% Short-term debt 20.676 28.830 40.450 53.258 $60.000 51.20% Total current liabilities $42.002 $77.330 $96.622 $116.508 $144.210 Long-term debt (PLUG) 26.800 27.206 40.747 59.494 138.781 Total liabilities $68.802 $104.536 $137.369 $176.002 $282.991 Shareholders' equity Paid-in capital 60.300 87.100 107.200 147.400 147.400 143.58% Retained earnings 61.513 64.998 67.319 69.442 72.680 Total shareholders' equity $121.813 $152.098 $174.519 $216.842 $220.080 Total liabilities and shareholders' equity $190.615 $256.634 $311.889 $392.844 $503.072

New England Corporation 2018 2019 2020 2021 2022 Pro forma financial statements Actual Actual Actual Actual Pro forma Assumptions Sales growth rate 25.88% 20.78% 7.00% Tax rate 45.39% 51.46% 40.14% 45.66% Dividend payout rate 37.86% 51.17% 38.50% 42.51% Interest rate (short-term debt) 6.30% 6.50% 7.15% 9.50% Interest rate (long-term debt) 5.30% 5.50% 5.96% 5.96% Income Statement ($ millions) Sales $62.498 $78.673 $95.023 $101.674 Cost of goods sold 40.121 52.578 63.186 69.647 SG&A expense 5.578 7.135 8.241 9.038 Depreciation expense 3.268 4.298 6.106 5.801 EBIT $13.531 $14.662 $17.490 $17.188 Interest expense 3.258 4.870 7.354 9.810 Pre-tax income $10.273 $9.792 $10.136 $7.378 Taxes 4.663 5.038 5.092 3.369 Net income $5.609 $4.753 $5.044 $4.009 Allocation of net income: Dividends $2.124 $2.432 $2.921 $1.704 Addition to retained earnings $3.486 $2.321 $2.123 $2.305 Balance Sheet ($ millions) ASSETS Current assets Cash and marketable securities $2.861 $5.275 $6.105 $7.916 $8.314 Accounts receivable 13.789 14.341 17.276 22.854 $23.370 Inventory 17.909 22.402 24.623 30.991 $33.808 Total current assets $34.559 $42.017 $48.004 $61.761 $65.493 Gross PPE 222.199 284.026 337.593 410.898 446.008 Accumulated depreciation 66.142 69.410 73.708 79.814 85.616 Net PPE $156.056 $214.616 $263.885 $331.083 $360.392 Total assets $190.615 $256.634 $311.889 $392.844 $425.885 LIABILITIES AND EQUITY Current liabilities Accounts payable $21.326 $48.500 $56.173 $63.250 $73.059 Short-term debt 20.676 28.830 40.450 53.258 $52.055 Total current liabilities $42.002 $77.330 $96.622 $116.508 $125.113 Long-term debt (PLUG) 26.800 27.206 40.747 59.494 81.625 Total liabilities $68.802 $104.536 $137.369 $176.002 $206.738 Shareholders' equity

Paid-in capital 60.300 87.100 107.200 147.400 147.400 Retained earnings 61.513 64.998 67.319 69.442 71.747 Total shareholders' equity $121.813 $152.098 $174.519 $216.842 $219.147 Total liabilities and shareholders' equity $190.615 $256.634 $311.889 $392.844 $425.885