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    Gorgon Inc. is projecting its 2024 financial statements based on information from 2023. Revenue is projected to grow 5% to $21,000. EBITDA margin will increase to 13% of revenue from 12%. Depreciation remains at 5% of fixed assets. Interest is 12.5% of the prior year's total debt. Working capital accounts increase proportionally to revenue growth but cash, prepaid expenses, and fixed assets remain unchanged. Gorgon does not require any new debt in 2024 to fund 5% sales growth as existing debt and equity can support the increased working capital needs. ROA is projected to be 2% for 2024 while ROE is projected to be 27% due

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    Gorgon Inc. is projecting its 2024 financial statements based on information from 2023. Revenue is projected to grow 5% to $21,000. EBITDA margin will increase to 13% of revenue from 12%. Depreciation remains at 5% of fixed assets. Interest is 12.5% of the prior year's total debt. Working capital accounts increase proportionally to revenue growth but cash, prepaid expenses, and fixed assets remain unchanged. Gorgon does not require any new debt in 2024 to fund 5% sales growth as existing debt and equity can support the increased working capital needs. ROA is projected to be 2% for 2024 while ROE is projected to be 27% due

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    7 views1 page

    HW1

    Uploaded by

    shruthisreehk
    Gorgon Inc. is projecting its 2024 financial statements based on information from 2023. Revenue is projected to grow 5% to $21,000. EBITDA margin will increase to 13% of revenue from 12%. Depreciation remains at 5% of fixed assets. Interest is 12.5% of the prior year's total debt. Working capital accounts increase proportionally to revenue growth but cash, prepaid expenses, and fixed assets remain unchanged. Gorgon does not require any new debt in 2024 to fund 5% sales growth as existing debt and equity can support the increased working capital needs. ROA is projected to be 2% for 2024 while ROE is projected to be 27% due

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    F650 – HW1

    Use the following information to make projections regarding Gorgon Inc. 2024. Assume that revenue
    growth is 5%, depreciation is 5% of fixed assets, EBITDA margin increases from 12% to 13% of revenue,
    interest is 12.5% of the prior year’s total debt. Cash, prepaid expenses, and fixed assets are unchanged,
    all working capital accounts increase as a fixed % of revenue. The tax rate is 34% (if applicable).

    2023 Income Statement 2023 Balance Sheet


    Revenue 20000 Assets Liabilities & Equity
    EBITDA 2400 Cash 215 Accounts Payable 7500
    depreciation 600 Prepaid Expenses 1300 Short Term Debt 5400
    Interest 1740 Accounts Receivable 3750 Long Term Debt 7265
    EBT 60 Inventory 4850 Retained Earnings 150
    Taxes 20.4 Fixed Assets 12000 Paid in Cap 1800
    Net Income 39.6 Total 22115 Total 22115

    a) How much (if any) new debt does Gorgon require in 2024 to fund its sales growth? (5 marks)
    b) Calculate both ROA and ROE for 2024. Why are these two ratios so different? (5 marks)

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