Cash Flows and FilSunset Boards, Inc., is a small company that manufacturesand sells surfboards in Malibu. Tad Marks, the founder of thecompany, is in charge of the design and sale of the surfboards,but his background is in surfing, not business. As a result, thecompany's financial records are not well maintained.The initial investment in Sunset Boards was provided byTad and his friends and family. Because the initial investmentwas relatively small, and the company has made surfboardsonly for its own store, the investors haven't required detailedfinancial statements from Tad. But thanks to word of mouthamong professional surfers, sales have picked up recently,and Tad is considering a major expansion. His plans includeopening another surfboard store in Hawaii, as well as supplyinghis "sticks (surfer lingo for boards) to other sellers,Tad's expansion plans require a significant investment,which he plans to finance with a combination of additionalfunds from outsiders plus some money borrowed from banks.Naturally, the new investors and creditors require more orga-nized and detailed financial statements than Tad has previouslyprepared. At the urging of his investors, Tad has hired financialanalyst Christina Jennings to evaluate the performance of thecompany over the past year.After rooting through old bank statements, sales receipts.tax returns, and other records, Christina has assembled thefollowing information:Cost of goods soldCashDepreciationInterest expenseSelling and administrativeAccounts payableNet fixed assetsSalesAccounts receivableNotes payableLong-term debtInventoryNew equity2020$306,72644,26186,59018,82460,32231,423382,014601,72931,36335,654192,82760,38202021$387,29066,87097,87121,57678,73253,181465,426733,46940,68138,929210,40881,20923,400Sunset Boards currently pays out 40 percent of net incomeas dividends to Tad and the other original investors, and it hasa 21 percent tax rate. You are Christina's assistant, and she hasasked you to prepare the following:1. An income statement for 2020 and 2021.2. A balance sheet for 2020 and 2021.3. Operating cash flow for each year.4. Cash flow from assets for 2021..5. Cash flow to creditors for 2021.6. Cash flow to stockholders for 2021.QUESTIONS1. How would you describe Sunset Boards's cash flows for2021? Write a brief discussion.2. In light of your discussion in the previous question, whatdo you think about Tad's expansion plans?

It has been given in the question that there is a 40% dividend paid on each year to the original…

Answered: 1. How would you describe Sunset…

Corporate Fin Focused Approach

5th Edition

ISBN:9781285660516

Author:EHRHARDT

Publisher:EHRHARDT

Chapter7: Valuation Of Stocks And Corporations

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1. How would you describe Sunset Boards's cash flows for 2021? Write a brief discussion. 2. In light of your discussion in the previous question, what do you think about Tad's expansion plans?