90 Part Two Planning Future Financial Performance TABLE 3.5 Forecasting with a Spreadsheet: Pro Forma Financial Forecast for R&E Supplies, Inc., December 31, 2018 ($ thousands) 2017 Actual $20,613 Year 2018 2019 Net sales 4. Growth rate in net sales 25.0% Cost of goods sold/net sales Gen., sell., and admin. expenses/net sales Long-term debt Current portion long-term debt 9. 86.0% 6. 12.0% 2$ 24 760 $660 100 $100 Interest rate 10.0% 10 11 Dividend/earnings after tax Current assets/net sales Tax rate 45.0% 50.0% 12 29.0% 13 14 Net fixed assets $280 Current liabilities/net sales 14.5% Owners' equity 16 INCOME STATEMENT 15 $1,730 17 Equations 2018 Forecast Forecast 18 Year 2018 2019 19 Net sales = B3 + B3*C4 $25,766 Cost of goods sold Gross profit 20 = C5*C19 = C19 - C2O 22,159 21 3,607 22 Gen., sell., and admin. exp. = C6*C19 = C9*(C7 + C8 + C40) = C21 - C22- C23 = C10 C24 3,092 23 Interest expense 231 24 Earnings before tax 285 25 Tax 128 26 Earnings after tax 27 Dividends paid = C24 - C25 156 = C11 C26 = C26 – C27 78 28 Additions to retained earnings 29 78 30 BALANCE SHEET 31 Current assets = C12*C19 7,472 32 Net fixed assets = C13 33 Total assets 280 = C31 + C32 34 7,752 Current liabilities 36 Long-term debt Owners' equity 35 = C14*C19 = C7 = B15 + C28 = C35 + C36 + C37 3,736 37 660 38 39 equity 1,808 6,204 Total liabilities and owners' 40 EXTERNAL FUNDING REQUIRED = C33 - C38 $ 1,548

Using the findings, provide a brief summary about the financial status of each of the companies and provide a recommendation for the investment choice.

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Calculate the projected price/earnings ratio and market/book ratio. Explain whether these ratios indicate that investors will be expected to have a high or low opinion of the company. Computron's Balance Sheets (Millions of Dollars)         2019 2020   Assets       Cash and equivalents $ 60 $ 50   Short-term investments 100 10   Accounts receivable 400 520   Inventories 620 820   Total current assets $ 1,180 $ 1,400   Gross fixed assets $ 3,900 $ 4,820   Less: Accumulated depreciation 1,000 1,320   Net fixed assets $ 2,900 $ 3,500   Total assets $ 4,080 $ 4,900           Liabilities and equity       Accounts payable $ 300 $ 400   Notes payable 50 250   Accruals 200 240   Total current liabilities $ 550 $ 890   Long-term bonds 800 1,100   Total liabilities $ 1,350 $ 1,990   Common stock 1,000 1,000   Retained earnings 1,730 1,910   Total equity $ 2,730 $ 2,910   Total liabilities and equity $ 4,080 $ 4,900…