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1/10/2007 Chapter 15. Solution for Ch 15-11 Build a Model This model provides answers to the end-of-the-chapter spreadsheet problem. Inputs Actual Projected Projected Projected Projected 2007 2008 2009 2010 2011 Sales Growth Rate 15% 10% 6% 6% Costs / Sales 72% 72% 72% 72% 72% Depreciation / Net PPE 10% 10% 10% 10% 10% Cash / Sales 1% 1% 1% 1% 1% Acct. Rec. / Sales 10% 10% 10% 10% 10% Inventories / Sales 20% 20% 20% 20% 20% Net PPE / Sales 75% 75% 75% 75% 75% Acct. Pay. / Sales 2% 2% 2% 2% 2% Accruals / Sales 5% 5% 5% 5% 5% Tax rate 40% 40% 40% 40% 40% Weighted average cost of capital (WACC) 10.5% 10.5% 10.5% 10.5% 10.5% Income Statement for the Year Ending December 31 (Millions of Dollars) 2007 Net Sales $800.0 Costs (except depreciation) $576.0 Depreciation $60.0 Total operating costs $636.0 Earning before int. & tax $164.0 Less interest $32.0 Earning before taxes $132.0 Taxes (40%) $52.8 Net income before pref. div. $79.2 Preferred div. $1.4 Net income avail. for com. div. $77.9 Common dividends $31.1 Addition to retained earnings $46.7 Number of shares (in millions) 10 Dividends per share $3.11 Balance Sheets for December 31 (Millions of Dollars) Assets 2007 Liabilities and Equity 2007 Cash $8.0 Accounts Payable $16.0 Marketable Securities 20.0 Notes payable 40.0 Accounts receivable... View Full Document

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