Slides05 - 5 More on strategic planning In this set of slides we will extend the planning model in two directions • run the model over multiple

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Unformatted text preview: 5. More on strategic planning In this set of slides, we will extend the planning model in two directions: • run the model over multiple time periods • use more realistic financial statements This will allow us to perform some “experiments” to investigate long-range planning issues. Example Consider the following accounting statements for 2006: Balance sheet Assets Liabilities CA 350 CL 300 FA 1500 LTD 900-------------- OE 650 TA 1850-------------- L+OE 1850 Income statement Sales 1100 Costs (775) Depreciation (167) Interest (100)-------------------- Pretax earnings 58 Tax (35%) (20)-------------------- NI 38 Dividend 19 Add. to RE 19 2 Example — continued Suppose that we wish to increase sales at rate g . Suppose further- more that • CA, FA, and CL are tied directly to sales (so also increase at rate g ). • Fixed assets are depreciated at rate d . • The tax rate is T . • The interest rate is r ....
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This note was uploaded on 03/31/2008 for the course FNCE 3010 taught by Professor Donchez,ro during the Fall '07 term at Colorado.

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Slides05 - 5 More on strategic planning In this set of slides we will extend the planning model in two directions • run the model over multiple

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