Doredo-Steel-Company-finance-homework

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FINANCE 304

COMPUTER ASSIGNMENT

INSTRUCTIONS: You will be allowed to do this project on any spreadsheet software packages. The instructor currently has access to the following packages: (1) Excel (2) Quattro Pro. The use of any other software may be approved by the instructor.

PROJECT

Doredo Steel Company is a wholesale steel distributor which purchase steel in carload lots and sells to several thousand steel users. The nature of the steel business requires that the company maintain large inventories to take care of customer requirements in the event of mill strikes or other delays.

In examining records from 1992 to 2014, the company found consistent relationships among the following accounts as a percent of sales:

Current assets20%

Net fixed assets60% if Sales < $110 million

70%, otherwise.

Accounts payable 8%

Other current liab. 6%

Profit margin 12%

The company’s sales for 2015 were $90 million. The company expects to grow by $12million per year over the next 5 years. The company wants to project its financial requirements for each of the next 5 years, assuming that the projected sales levels are achieved. Assume further that the company pays out 25 percent of earnings as dividends.

Construct pro forma balance sheets for the end of each of the next 5 years (from 2016 to 2020), assuming that 20 percent by issuing long-term debt, and 80 percent by selling new common stock.

NOTE: You will be expected to unload your file to the Canvas by 3:00 pm on June 9.

NAME ____________________

____________________________________________________________________________________

Doredo Steel Company

PRO FORMA Balance Sheet

For the Period of 2016-2020

(Thousands of Dollars)

____________________________________________________________________________________

YEAR

2015

2016

2017

2018

2019

2020

Sales

90,000

$0.0

+N5+

+N6+

+N7+

$0.0

Current A

30,000

$0.0

+P8+

+P9+

+P10+

$0.0

Fixed A

56,000

Total

86,000

Acct Payable

9,000

Other cur L

4,500

L/t debt

14,000

Common St

15,000

Retained

43,500

Tot. L&E

86,000

*Interests $120,000 Constant

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