60.1K

Verified Solution

Link Copied!

Forecast Ideko's free cash flow (reproduce Table 19.10 ), assuming Ideko's market share will increase by 0.45 percent per year, investment, financing, and depreciation will be adjusted accordingly; and the projected improvements in working capital Big occur (that is, Ideko's working capital requirements through 2010 will be as shown here E). Ideko's pro-forma income statements for 2005-2010 are shown here EJ, while its balance sheet for 2005 is shown here

E. Ideko's production plant will require an expansion in 2010 (when production volume will exceed the current level by 50%), and the cost of this expansion will be $15.3 million. This amount will be borrowed from a financial institution at an interest rate of 6.6%. The new projected capital investments are shown here EB. (Assume an income tax rate of 35%.). Calculate Ideko's free cash flow through 2010 below: (Round to the nearest $ 000.)

( (Aavute in inoone tax rate of 35% ) Ideko's Free Cash Flow Forecast (Click on the following icon , in order to copy its contents into a spreadsheet.) Working Capital (\$ 000) 2005 2006 2007 2008 2009 2010 Assets Accounts Receivable Raw Materials Finished Goods Total Current Assets Increase in Net Working Capital \begin{tabular}{rrrrrr} 18,648 & 13,898 & 15,510 & 17,280 & 19,222 & 21,352 \\ 1,972 & 1,455 & 1,607 & 1,771 & 1,950 & 2,144 \\ 4,156 & 4,673 & 5,245 & 5,879 & 6,582 & 7,360 \\ 6,216 & 6,949 & 7,755 & 8,640 & 9,611 & 10,676 \\ \hline 30,992 & 26,975 & 30,117 & 33,570 & 37,365 & 41,532 \\ & & & & & \\ 1,287 & 1,350 & 1,526 & 1,678 & 1,842 & 2,074 \\ 3,364 & 3,900 & 4,507 & 5,195 & 5,827 & 6,440 \\ \hline 4,651 & 5,250 & 6,033 & 6,873 & 7,669 & 8,514 \\ 26,341 & 21,725 & 24,084 & 26,697 & 29,696 & 33,018 \\ & (4,616) & 2,359 & 2,613 & 2,999 & 3,322 \\ \hline \end{tabular} \begin{tabular}{|lrrrrrrr} \hline Income Statement ($000) & 2005 & 2006 & 2007 & 2008 & 2009 & 2010 \\ \hline Sales & 75,627 & 84,548 & 94,352 & 105,117 & 116,931 & 129,890 \\ Cost of Goods Sold & & & & & & \\ Raw Materials & (15,995) & (17,698) & (19,546) & (21,552) & (23,729) & (26,087) \\ Direct Labor Costs & (17,716) & (20,203) & (22,998) & (26,137) & (29,660) & (33,609) \\ \hline Gross Profit & 41,916 & 46,647 & 51,808 & 57,428 & 63,542 & 70,194 \\ Sales and Marketing & (11,291) & (13,934) & (17,012) & (20,582) & (23,538) & (26,147) \\ Administrative & (13,590) & (12,657) & (14,124) & (14,685) & (15,166) & (16,847) \\ EBITDA & 17,035 & 20,056 & 20,672 & 22,161 & 24,838 & 27,200 \\ Depreciation & (5,430) & (5,367) & (5,310) & (5,259) & (5,213) & (6,702) \\ EBIT & 11,605 & 14,689 & 15,362 & 16,902 & 19,625 & 20,498 \\ Interest Expense ( net) & (71) & (6,600) & (6,600) & (6,600) & (6,600) & (6,600) \\ \hline Pretax Income & 11,534 & 8,089 & 8,762 & 10,302 & 13,025 & 13,898 \\ Income Tax & (4,037) & (2,831) & (3,067) & (3,606) & (4,559) & (4,864) \\ \hline Net Income & 7,497 & 5,258 & 5,695 & 6,696 & 8,466 & 9,034 \\ \hline \end{tabular} Estimated 2005 Balance Sheet Data for Ideko Corporation \begin{tabular}{lr} \hline Balance Sheet (\$ 000) & \\ Assets & 6,164 \\ Cash and Equivalents & 18,648 \\ Accounts Receivable & 6,165 \\ Inventories & 30,977 \\ Total Current Assets & 48,870 \\ Property, Plant, and Equipment & 72,332 \\ Goodwill & 152,179 \\ \hline Total Assets & \\ \hline Liabilities and Stockholders' Equity & 4,654 \\ Accounts Payable & 100,000 \\ Debt & 104,654 \\ \hline Total Liabilities & 47,525 \\ \hline Stockholders' Equity & 152,179 \\ \hline Total Liabilities and Equity \end{tabular} (Click on the following icon p in order to copy its contents into a spreadsheet.) ( (Aavute in inoone tax rate of 35% ) Ideko's Free Cash Flow Forecast (Click on the following icon , in order to copy its contents into a spreadsheet.) Working Capital (\$ 000) 2005 2006 2007 2008 2009 2010 Assets Accounts Receivable Raw Materials Finished Goods Total Current Assets Increase in Net Working Capital \begin{tabular}{rrrrrr} 18,648 & 13,898 & 15,510 & 17,280 & 19,222 & 21,352 \\ 1,972 & 1,455 & 1,607 & 1,771 & 1,950 & 2,144 \\ 4,156 & 4,673 & 5,245 & 5,879 & 6,582 & 7,360 \\ 6,216 & 6,949 & 7,755 & 8,640 & 9,611 & 10,676 \\ \hline 30,992 & 26,975 & 30,117 & 33,570 & 37,365 & 41,532 \\ & & & & & \\ 1,287 & 1,350 & 1,526 & 1,678 & 1,842 & 2,074 \\ 3,364 & 3,900 & 4,507 & 5,195 & 5,827 & 6,440 \\ \hline 4,651 & 5,250 & 6,033 & 6,873 & 7,669 & 8,514 \\ 26,341 & 21,725 & 24,084 & 26,697 & 29,696 & 33,018 \\ & (4,616) & 2,359 & 2,613 & 2,999 & 3,322 \\ \hline \end{tabular} \begin{tabular}{|lrrrrrrr} \hline Income Statement ($000) & 2005 & 2006 & 2007 & 2008 & 2009 & 2010 \\ \hline Sales & 75,627 & 84,548 & 94,352 & 105,117 & 116,931 & 129,890 \\ Cost of Goods Sold & & & & & & \\ Raw Materials & (15,995) & (17,698) & (19,546) & (21,552) & (23,729) & (26,087) \\ Direct Labor Costs & (17,716) & (20,203) & (22,998) & (26,137) & (29,660) & (33,609) \\ \hline Gross Profit & 41,916 & 46,647 & 51,808 & 57,428 & 63,542 & 70,194 \\ Sales and Marketing & (11,291) & (13,934) & (17,012) & (20,582) & (23,538) & (26,147) \\ Administrative & (13,590) & (12,657) & (14,124) & (14,685) & (15,166) & (16,847) \\ EBITDA & 17,035 & 20,056 & 20,672 & 22,161 & 24,838 & 27,200 \\ Depreciation & (5,430) & (5,367) & (5,310) & (5,259) & (5,213) & (6,702) \\ EBIT & 11,605 & 14,689 & 15,362 & 16,902 & 19,625 & 20,498 \\ Interest Expense ( net) & (71) & (6,600) & (6,600) & (6,600) & (6,600) & (6,600) \\ \hline Pretax Income & 11,534 & 8,089 & 8,762 & 10,302 & 13,025 & 13,898 \\ Income Tax & (4,037) & (2,831) & (3,067) & (3,606) & (4,559) & (4,864) \\ \hline Net Income & 7,497 & 5,258 & 5,695 & 6,696 & 8,466 & 9,034 \\ \hline \end{tabular} Estimated 2005 Balance Sheet Data for Ideko Corporation \begin{tabular}{lr} \hline Balance Sheet (\$ 000) & \\ Assets & 6,164 \\ Cash and Equivalents & 18,648 \\ Accounts Receivable & 6,165 \\ Inventories & 30,977 \\ Total Current Assets & 48,870 \\ Property, Plant, and Equipment & 72,332 \\ Goodwill & 152,179 \\ \hline Total Assets & \\ \hline Liabilities and Stockholders' Equity & 4,654 \\ Accounts Payable & 100,000 \\ Debt & 104,654 \\ \hline Total Liabilities & 47,525 \\ \hline Stockholders' Equity & 152,179 \\ \hline Total Liabilities and Equity \end{tabular} (Click on the following icon p in order to copy its contents into a spreadsheet.)

Answer & Explanation Solved by verified expert

See Answer