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FM12 Ch 14 Tool Kit - B C D E F G H I 1 2 3 Chapter 14 Tool...

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12/20/2006 Chapter 14. Tool Kit for Financial Planning and Forecasting Financial Statements roDrive's recent financial statements are shown below. INCOME STATEMENT (in millions of dollars) 2006 2007 Sales $2,850.0 $3,000.0 Costs except depreciation $2,497.0 $2,616.2 Depreciation $90.0 $100.0 Total operating costs $2,587.0 $2,716.2 EBIT $263.0 $283.8 Less Interest $60.0 $88.0 Earnings before taxes (EBT) $203.0 $195.8 Taxes (40%) $81.2 $78.3 NI before preferred dividends $121.8 $117.5 Preferred dividends $4.0 $4.0 NI available to common $117.8 $113.5 Dividends to common $53.0 $57.5 $64.8 $56.0 Shares of common equity 50 50 Dividends per share $1.06 $1.15 Price per share $26.00 $23.00 BALANCE SHEET (in millions of dollars) 2006 2007 Assets Cash $15.0 $10.0 ST Investments $65.0 $0.0 Accounts receivable $315.0 $375.0 Inventories $415.0 $615.0 Total current assets $810.0 $1,000.0 Net plant and equipment $870.0 $1,000.0 Total assets $1,680.0 $2,000.0 2006 2007 Liabilities and equity Accounts payable $30.0 $60.0 Accruals $130.0 $140.0 Notes payable $60.0 $110.0 Total current liabilities $220.0 $310.0 Long-term bonds $580.0 $754.0 Total liabilities $800.0 $1,064.0 Preferred stock $40.0 $40.0 Common stock $130.0 $130.0 Retained earnings $710.0 $766.0 Total common equity $840.0 $896.0 Total liabilities and equity $1,680.0 $2,000.0 LES FORECAST (Section 14.2) Sales Ln(Sales) 2003 $2,058 7.63 2004 2,534 23.1% 7.84 2005 2,472 -2.4% 7.81 2006 2,850 15.3% 7.96 2007 3,000 5.3% 8.01 Average = 10.3% E SALES FORECAST Average annual growth rate = 10.3% Add. to retained earnings ( RE) tegic planning is one of the core functions of an organization, and it involves the coordination of operating plans with ncial plans. While operational plans outline how the firm intends to reach its corporate objectives, financial plans ine the manner in which the firm will obtain the necessary productive assets to operate. Financial planning generally ns with a sales forecast, and that forecast generally starts with a review of the firm's recent history. Here are roDrive Inc.'s sales over the past 5 years: Annual Growth Rate first step in a sales forecast are several ways to estimate the historical growth rate, ranging from the simple to the complicated. The plest are to estimate the average annual growth rate and the compound annual growth rate. B C D E F G H I 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79
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Compound annual growth rate = 9.9% (Use the RATE function.) Intercept = -438,517 (Using the INTERCEPT function) Slope = 220 (Using the SLOPE function) could also use regression analysis to estimate future sales. The easiest way is to plot the points using the Chart Wizard, as we did w. Then select the Chart, go the menu bar and select Chart, Add Trendline…, go to the Options tab (see screen shot below), check play equation on chart" and set the Forecast for 1 unit Forward. This will print the regression line on the chart and show the cast for the next year. chart shows the regression line. If you actually want the regression intercept and slope, the easiest way is to use the function Wizard reate the INTERCEPT and SLOPE functions, as shown below.
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