ch17 - CHAPTER17 FinancialPlanningandForecasting...

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    17-1 CHAPTER 17 Financial Planning and Forecasting Forecasting sales Projecting the assets and internally  generated funds Projecting outside funds needed Deciding how to raise funds
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    17-2 Balance sheet (2002), in millions of dollars $ accruals $ 100 Accounts rec. 240 Notes payable 100 Inventories 240 Total CL $ 200 Total CA $ 500 L-T debt 100 Common stock 500 Net fixed Retained assets 500 earnings 200 Total assets $1,000 Total claims $1,000
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    17-3 Income statement (2002), in millions of dollars Sales $2,000.00 Less: Var. costs (60%) 1,200.00 Fixed costs 700.00 EBIT $ 100.00 Interest 16.00 EBT $ 84.00 Taxes (40%) 33.60 Net income $ 50.40 Dividends (30%) $15.12 Add’n to RE $35.28
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    17-4 Key ratios NWC Industry Condition BEP 10.00% 20.00% Poor Profit margin 2.52% 4.00% ROE 7.20% 15.60% DSO 43.80 days 32.00 days Inv. turnover 8.33x 11.00x F. A. turnover 4.00x 5.00x T. A. turnover 2.00x 2.50x Debt/assets 30.00% 36.00% Good TIE 6.25x 9.40x Poor Current ratio 2.50x 3.00x Payout ratio 30.00% 30.00% O. K.
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    17-5 Key assumptions Operating at full capacity in 2002. Each type of asset grows proportionally with  sales. Payables and accruals grow proportionally  with sales. 2002 profit margin (2.52%) and payout (30%)  will be maintained. Sales are expected to increase by $500  million.  (% S = 25%)
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    17-6 Determining additional funds  needed, using the AFN equation AFN =  (A*/S 0 )ΔS – (L*/S 0 ) ΔS – M(S 1 )(RR) =  ($1,000/$2,000)($500)      – ($100/$2,000)($500)      – 0.0252($2,500)(0.7) =  $180.9 million.
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    17-7 How shall AFN be raised? The payout ratio will remain at 30 percent 
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ch17 - CHAPTER17 FinancialPlanningandForecasting...

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