Chapter14.
Solution for Ch 14-10 Build a Model
Here are the company's historical sales.
Hint: Use the Trend function to forecast sales for 2008.
Year
Sales
Growth Rate
2002
129,215,000
2003
180,901,000
40.0%
2004
235,252,000
30.0%
2005
294,065,000
25.0%
2006
396,692,000
34.9%
2007
455,150,000
14.7%
2008
515,465,267
% Increase in Predicted Sales for 2008 over 2007:
2007 Sales
455,150,000
2008 Sales
515,465,267
% increase
13.25%
Note: This growth rate has been declining over time.
Key Input Data:
Used in the
forecast
Tax rate
40%
Dividend growth rate
8%
9%
11%
December 31 Income Statements:
(in thousands of dollars)
Forecasting
2007
2008
2008
2007
basis
Ratios
Inputs
Forecast
Sales
$455,150
Growth
20.00%
$546,180
$386,878
% of sales
85.00%
85.00%
$464,253
Cumberland Industries' financial planners must forecast the company's financial results for the coming year.
The forecast
for many items will be based on sales, and any additional funds needed will be obtained as notes payable.
a.
Assuming the historical trend continues, what will sales be in 2008?
Base your forecast on a spreadsheet regression
analysis of the 2002-2007 sales data above, and include the summary output of the regression in your answer.
By what
percentage are sales predicted to increase in 2008 over 2007?
Is the sales growth rate increasing or decreasing?