FIN448-PPS-5-FinancialModeling-SP19-Solution.pdf

# FIN448-PPS-5-FinancialModeling-SP19-Solution.pdf - FIN 448...

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FIN 448, Sections 1 & 2, Spring 2019 Advanced Financial Management 1 Practice Problem Set #5 Financial Modeling – SOLUTION – See the Excel file “FIN448-PPS-5-FinancialModeling-SP19-Solution.xlsx” for detailed modeling and calculation results in Excel. 1. You are given the following assumptions to build pro forma statements for Firm AFM-Debt: Initial Sales in Year 0 = \$20,000. Yearly Sales Growth Rate = 7%. Cost of Goods Sold (COGS) / Sales = 65%. Gross Fixed Assets / Sales = 90%. Depreciation Rate = 6% of Gross Fixed Assets averaged over this year and last year. Current Assets / Sales = 20% Non-Interest-Bearing Current Liabilities (NIBCLs) / Sales = 18%. Interest Rate on Debt = 8%. Dividend Payout Ratio = 60% Corporate Tax rate = 40% Paid-in Equity Capital in Year 0 = \$3,500, expected to remain constant. Accumulated Retained Earnings in Year 0 = \$1,200. Accumulated Depreciation in Year 0 = \$3,000. Use debt as the plug, project: 1) Income Statement for Years 1 to 5, 2) Balance Sheet for Years 0 to 5, and 3) Free Cash Flow for Years 1 to 5.

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• Spring '19
• Jian Cai
• Balance Sheet, Generally Accepted Accounting Principles, gross fixed assets, Non-Interest-Bearing Current Liabilities

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