Assignment for Case Wilson Lumber 2 | Massachusetts Institute of Technology - Edubirdie

University:
Massachusetts Institute of Technology
Course:
15.501/516 | Accounting
Academic year:

2023
Views:

482

Pages:

1
Author:

vendersnxx

Corporate Finance Assignment 2: Wilson Lumber 2 (REQUIRED) Now that you have a better understanding of Wilson’s business so far, you need to look at the future and forecast his funding needs. 1. Do you agree with Mr. Wilson’s conclusion that a $325,000 line of credit will be sufficient to meet his foreseeable funding needs? How much will he need to borrow to finance his expected sales over the next few years? 2. As Mr. Wilson’s financial advisor, would you recommend further expansion of his business and more debt financing? Why or why not? 3. As his banker, would you be willing to lend to Mr. Wilson? If so, what conditions might you attach to the loan? If not, explain your reasons. To answer question 1, assume that sales reach $2.5MM in 1985 and construct a pro forma income statement and balance sheet projections for 1985-1988. Do this for each of the following three scenarios: 1. Sales grow at 25% per year in 1986-1988 and accounts payable remains at 55 days. 2. Sales grow at 25% per year in 1986-1988 and accounts are paid by the tenth day in order to get the 2% discount. 3. Sales grow at 14% per year in 1986-1988 and accounts are paid by the tenth day in order to get the 2% discount. You will need to estimate the size of the bank loan under each scenario. To do this, you should first forecast the value of assets using the appropriate assumptions. Next, forecast non-bank liabilities – including a guess as to the value of the Net Income. The difference gives you an estimate of the amount that Wilson needs to borrow from the bank. Plug in an estimate of the bank loan. Recalculate net Income using the interest of the estimated bank loan. Iterate until the balance sheet balances.

Related Documents

Assignment for Case Wilson Lumber 2

Assignment for Case Wilson Lumber 2 - Page 1

of 1

Recommended Documents

The Balance Sheet and the Recording of Transactions

The Balance Sheet and the Recording of Transactions

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

The Accounting Process

The Accounting Process

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Introduction to Financial and Managerial Accountin Problem Set 2 - Answers

Introduction to Financial and Managerial Accountin Problem Set 2 - Answers

Massachusetts Institute of Technology 15.501/516 | Accounting

Answer Key

Financial Statements - the Annual Report

Financial Statements - the Annual Report

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

The Classified Balance Sheet

The Classified Balance Sheet

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Tabular analysis of the effects of various

Tabular analysis of the effects of various

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Mapping the Telecom Value Chain - A Roadmap for Communications Networks

Mapping the Telecom Value Chain - A Roadmap for Communications Networks

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Constructive Conflict, Uncertainty and Real Options

Constructive Conflict, Uncertainty and Real Options

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Strategic Management and Consulting Proseminar Strategic Questions Lufthansa

Strategic Management and Consulting Proseminar Strategic Questions Lufthansa

Massachusetts Institute of Technology 15.501/516 | Accounting

Answer Key

Advanced Corporate Risk Management MW Petroleum (B) Case Assignment

Advanced Corporate Risk Management MW Petroleum (B) Case Assignment

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Communication for Managers Active Listening Exercise

Communication for Managers Active Listening Exercise

Massachusetts Institute of Technology 15.501/516 | Accounting

Answer Key

Communication for Managers Craigstone Corporation Worksheet

Communication for Managers Craigstone Corporation Worksheet

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

New Documents from this Course

Introduction to Financial and Managerial Accountin Problem Set 1

Introduction to Financial and Managerial Accountin Problem Set 1

Massachusetts Institute of Technology 15.501/516 | Accounting

Answer Key

Midterm 2 Review Notes

Midterm 2 Review Notes

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Marketable Securities (Deferred Taxes)

Marketable Securities (Deferred Taxes)

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note

Long-term Assets, Depreciation (Deferred Taxes)

Long-term Assets, Depreciation (Deferred Taxes)

Massachusetts Institute of Technology 15.501/516 | Accounting

Lecture Note