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fm3_problems03 - FIRST FINANCIAL MODEL Sales growth Current...

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FIRST FINANCIAL MODEL Sales growth 10% Current assets/Sales 15% Current liabilities/Sales 8% Net fixed assets/Sales 77% Costs of goods sold/Sales 50% Depreciation rate 10% Interest rate on debt 10.00% Interest paid on cash and marketable securities 8.00% Tax rate 40% Dividend payout ratio 40% Year 0 1 2 3 Income statement Sales 1,000 1,100 1,210 1,331 Costs of goods sold (500) (550) (605) (666) Interest payments on debt (32) (32) (32) (32) Interest earned on cash and marketable securities 6 9 14 20 Depreciation (100) (117) (137) (161) Profit before tax 374 410 450 492 Taxes (150) (164) (180) (197) Profit after tax 225 246 270 295 Dividends (90) (98) (108) (118) Retained earnings 135 148 162 177 Balance sheet Cash and marketable securities 80 144 213 289 Current assets 150 165 182 200 Fixed assets At cost 1,070 1,264 1,486 1,740 Depreciation (300) (417) (554) (715) Net fixed assets 770 847 932 1,025 Total assets 1,000 1,156 1,326 1,513 Current liabilities 80 88 97 106 Debt 320 320 320 320 Stock 450 450 450 450 Accumulated retained earnings 150 298 460 637 Total liabilities and equity 1,000 1,156 1,326 1,513 Year 0 1 2 3 Free cash flow calculation Profit after tax 246 270 295 Add back depreciation 117 137 161 Subtract increase in current assets (15) (17) (18) Add back increase in current liabilities 8 9 10 Subtract increase in fixed assets at cost (194) (222) (254) Add back after-tax interest on debt 19 19 19 Subtract after-tax interest on cash and+A14 mkt. securities (5) (9) (12) Free cash flow 176 188 201 CONSOLIDATED STATEMENT OF CASH FLOWS: RECONCILIN
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Cash flow from operating activities Profit after tax 246 270 295 Add back depreciation 117 137 161 Adjust for changes in net working capital: Subtract increase in current assets (15) (17) (18) Add back increase in current liabilities 8 9 10 Net cash from operating activities 356 400 448 Cash flow from investing activities Aquisitions of fixed assets--capital expenditures (194) (222) (254) Purchases of investment securities 0 0 0 Proceeds from sales of investment securities 0 0 0 Net cash used in investing activities (194) (222) (254) Cash flow from financing activities Net proceeds from borrowing activities 0 0 0 Net proceeds from stock issues, repurchases 0 0 0 Dividends paid (98) (108) (118) Net cash from financing activities (98) (108) (118) Net increase in cash and cash equivalents 64 70 76 Check: changes in cash and mkt. securities 64 70 76 =IF(B76<=B3,"nmf",B87)
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4 5 1,464 1,611 #MACRO? (732) (805) #MACRO? (32) (32) #MACRO? 26 33 #MACRO? (189) (220) #MACRO? 538 587 #MACRO? (215) (235) #MACRO? 323 352 #MACRO? (129) (141) #MACRO? 194 211 #MACRO? 371 459 #MACRO? 220 242 #MACRO? 2,031 2,364 #MACRO? (904) (1,124) #MACRO? 1,127 1,240 #MACRO? 1,718 1,941 #MACRO? 117 129 #MACRO? 320 320 #MACRO? 450 450 #MACRO? 830 1,042 #MACRO? 1,718 1,941 #MACRO? 4 5 323 352 #MACRO? 189 220 #MACRO? (20) (22) #MACRO? 11 12 #MACRO? (291) (333) #MACRO? 19 19 #MACRO? (16) (20) #MACRO? 214 228 #MACRO? NG THE CASH BALANCES
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323 352 #MACRO? 189 220 #MACRO? (20) (22) #MACRO? 11 12 #MACRO? 502 562 #MACRO? (291) (333) #MACRO? 0 0 <-- Not in our model 0 0 <-- Not in our model (291) (333) #MACRO? 0 0 #MACRO? 0 0 #MACRO? (129) (141) #MACRO? (129) (141) #MACRO? 82 88 #MACRO? 82 88 #MACRO?
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The answers for this question are given on the previous spreadsheet
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EXERCISE 2 Sales growth 10% Current assets/Sales 15% Current liabilities/Sales 8% Net fixed assets/Sales 77% Costs of goods sold/Sales 50% Sales, general and administrative expenses 200 <-- Added Depreciation rate 10% Interest rate on debt 10.00% Interest paid on cash & marketable securities 8.00% Tax rate 40% Dividend payout ratio 40% Year 0 1 2 3 Income statement Sales 1,000 1,150 1,210 1,331 Costs of goods sold (500) (575) (605) (666) SG&A (600) (200) (200) Interest payments on debt (32) (32) (32) (32)
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