Amalgamated Enterprises Is Planning to Purchase Some New Equipment

question 103

Essay

Amalgamated Enterprises is planning to purchase some new equipment.With this new equipment,the company expects sales to increase from $8,000,000 to $10,000,000.A portion of the financing for the purchase of the equipment will come from a $1,000,000 new common stock issue.The company knows that its current assets,fixed assets,accounts payable,and accrued expenses increase directly with sales.The company's net profit margin on sales is 8 percent,and the company plans to pay 40 percent of its after-tax earnings in dividends.A copy of the company's current balance sheet is given below.
Amalgamated Enterprises Balance Sheet

Prepare a pro forma balance sheet for Amalgamated for next year.

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Definitions:

12-volt Chassis

A vehicle or machinery framework that operates on a 12-volt electrical system, common in most passenger cars and light equipment.

Voltage Loss

The reduction in electrical potential across a conductor as electrical current flows through it, due to the impedance of the conductor.

Starter Solenoid

An electromagnetic switch that engages the starter motor of an engine, turning it over to initiate combustion.

Voltage Drop

The reduction in electrical voltage as it passes through a component or conductor, due to resistance or impedance in the circuit.