Principles of Managerial Finance

CHAPTER 3 Cash Flow and Financial Planning 141

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Remember to check the book’s Web site at

http://www.aw.com/gitman

for additional resources, including additional Web exercises.

the percent-of-sales methodto estimate all values exceptdepreciation expense

and interest expense, which have been estimated by management and

included in the table.)

b. Use the projected financial data along with relevant data from the pro forma

income statement prepared in part ato prepare the pro forma balance sheet

at December 31, 2004. (Hint:Use the judgmental approach.)

c. Will Martin Manufacturing Company need to obtain external financingto

fund the proposed equipment modernization program? Explain.

WEB EXERCISE Go to the Best Depreciation Calculatorat the Fixed Asset Info. site, http://www.
fixedassetinfo.com/defaultCalc.asp. Use this calculator to determine the
straight-line, declining balance (using 200%), and MACRS depreciation sched-
ules for the following items, using half-year averaging (the half-year convention).

Make a chart comparing the depreciation amounts that these three methods

yield for the years 2002 to 2007. Discuss the implications of these differences.

Item Date placed in service Cost

Office furnishings 2/15/2002 $22,500

Laboratory equipment 5/27/2001 $14,375

Fleet vehicles 9/5/2000 $45,863