Doredo Steel Company

Question description

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 assets 20%

Net fixed assets 60% 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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