GAMMA SYSTEMS MANUFACTURING CORPORATION
CHAPTER 15 PROBLEMS 5-7:
Balance Sheets
2015 2016 2017 2018
Check Year
Cash 50,000 40,000 42,400 44,944
Accounts Receivables 200,000 260,000 275,600 292,136
Inventories 450,000 500,000 530,000 561,800
Total Current Assets 700,000 800,000 848,000 898,880
Fixed Assets, Net 400,000 500,000 530,000 561,800
Total Assets
1,100,000 1,300,000 1,378,000 1,460,680
Accounts Payable
130,000 $170,000
130,000 170,000 180,200 191,012
Accruals 50,000 70,000 74,200 78,652
Cost of Goods Sold 780,000 900,000 954,000 1,011,240
Gross Profit 620,000 700,000 742,000 786,520
Marketing 130,000 150,000 159,000 168,540
General & Administrative 150,000 150,000 159,000 168,540
Depreciation 40,000 53,000
040,000 53,000 56,180 59,551
A) Statement of Cash Flows Approach to FCF/VCF 2017
Operating:
Net Income 184,440
+Depreciation 56,180
-Inc. in Accts. Receivable -15,600
-Inc. in Inventories -30,000
+Inc. in Accts. Payable 10,200
+Inc. in Accruals 4,200
CF from Operations 209,420
Investing:
-Inc. in Fixed Assets -86,180
Financing:
+Increase in Bank Loans 5,400
+Increase in Long-Term Debt 24,000
Change in Cash Balance Before Dividends 152,640
Dividends -150,240
Change in Balance Sheet Cash Account 2,400
FCF (from Statement of Cash Flows) 150,240
(Same as Dividends here)
Shortcut Method:
NI 184,440
GAMMA SYSTEMS MANUFACTURING CORPORATION
Problem 6
A) 1,073,142.86$
B) Balance Sheets
2015 2016 2017 2018
Check Year
Cash 50,000 40,000 42,000 44,100
Accounts Receivables 200,000 260,000 273,000 286,650
Inventories 450,000 500,000 525,000 551,250
Total Current Assets 700,000 800,000 840,000 882,000
Fixed Assets, Net 400,000 500,000 525,000 551,250
Total Assets
1,100,000 1,300,000 1,365,000 1,433,250
Accounts Payable 130,000 170,000 178,500 187,425
Cost of Goods Sold 780,000 900,000 945,000 992,250
Gross Profit 620,000 700,000 735,000 771,750
Marketing 130,000 150,000 157,500 165,375
General & Administrative 150,000 150,000 157,500 165,375
Depreciation 40,000 53,000 55,650 58,433
EBIT 300,000 347,000 364,350 382,568
Interest
45,000 57,000 59,850 62,843
Earnings Before Taxes 255,000 290,000 304,500 319,725
GAMMA SYSTEMS MANUFACTURING CORPORATION
C) Balance Sheets
2015 2016 2017 2018
Check Year
Cash 50,000 40,000 42,800 45,796
Accounts Receivables 200,000 260,000 278,200 297,674
Inventories 450,000 500,000 535,000 572,450
Total Current Assets 700,000 800,000 856,000 915,920
Fixed Assets, Net 400,000 500,000 535,000 572,450
Total Assets
1,100,000 1,300,000 1,391,000 1,488,370
0
Accounts Payable 130,000 170,000 181,900 194,633
Accruals 50,000 70,000 74,900 80,143
Bank Loan 90,000 90,000 96,300 103,041
Total Current Liabilities 270,000 330,000 353,100 377,817
General & Administrative 150,000 150,000 160,500 171,735
Depreciation 40,000 53,000 56,710 60,680
EBIT 300,000 347,000 371,290 397,280
Interest
45,000 57,000 60,990 65,259
Earnings Before Taxes 255,000 290,000 310,300 332,021
Income Taxes (40%) 102,000 116,000 124,120 132,808
Net Income 153,000 174,000 186,180 199,213
Dividends 134,000 146,280 156,520
Retained Earnings 40,000 39,900 42,693
GAMMA SYSTEMS MANUFACTURING CORPORATION
Problem 7
Balance Sheets
2015 2016 2017 2018 2019 2020
Check Year
Cash 50,000 40,000 46,000 50,600 53,636 56,854
Accounts Receivables 200,000 260,000 299,000 328,900 348,634 369,552
Inventories 450,000 500,000 575,000 632,500 670,450 710,677
Total Current Assets 700,000 800,000 920,000 1,012,000 1,072,720 1,137,083
Fixed Assets, Net 400,000 500,000 575,000 632,500 670,450 710,677
Total Assets
1,100,000 1,300,000 1,495,000 1,644,500 1,743,170 1,847,760
00
Accounts Payable 130,000 170,000 195,500 215,050 227,953 241,630
Accruals 50,000 70,000 80,500 88,550 93,863 99,495
Long-Term Debt
Cost of Goods Sold
Gross Profit 620,000 700,000 805,000 885,500 938,630 994,948
Marketing
130,000 150,000 172,500 189,750 201,135 213,203
General & Administrative 150,000 150,000 172,500 189,750 201,135 213,203
Depreciation 40,000 53,000 60,950 67,045 71,068 75,332
EBIT
300,000 347,000 399,050 438,955 465,292 493,210
Interest
45,000 57,000 65,550 72,105 76,431 81,017
Earnings Before Taxes 255,000 290,000 333,500 366,850 388,861 412,193
Income Taxes (40%) 102,000 116,000 133,400 146,740 155,544 164,877
Retained Earnings 40,000 85,500 65,550 43,263 45,859
Dividend growth g = 34.87% 22.96% 6.00%
2018 Terminal Value 1,583,780
VCF 114,600 1,738,340
2016 NPV 1,345,567