Course: FI 307
Financial Modeling
Summer 2015
Dr. John Zott
Senior Adjunct Professor
Ageno School of Business
GOLDEN GATE UNIVERSITY
Contact Information
Email:
[email protected]
Telephone: 831-46
Ques
Use the PV command to find the present value of each of the following future cash flows at a discount rate of 10% per year, compounded monthly: (Warning: Be sure to
use the rate thats appropriate
Session 2: Forecasting Annual Revenues
Overview:
Forecasting annual revenues is an essential step in corporate planning. Forecasts help CFOs
arrange financing for capital expenditures, plan month-to-m
Present and Future Values for Constant Annuities
Annual saving (A)
Number of years (n, <= 20)
Interest rate (rr, % per year)
$1,000
10
8.00%
Computations using
Table
Formulas
Functions
Annuity in arre
Part a
No. of period
Number of year
Interest per year
Present value
Payment
Future value
P/Y
N
I/Y
PV
PMT
FV
END/BEG
12
6
10%
-$81,642.73
1,500
0
1
Part b
P/Y
N
I/Y
PV
PMT
FV
END/BEG
12
6
10%
-$80,968
Loan Amortization Table for Changing Interest Rate
Input Data
Initial loan balance (P, $)
$100,000
Length (yrs)
5
3
7
Period 1
Period 2
Period 3
Loan life (yrs)
Required annual payment (APmt, $)
Int R
Effect of Compounding Frequency
Nominal annual interest rate (APR)
Number of compounding periods per year
Amount of initial investment
Length of investment period (years)
8.00%
2
$100,000
10
Effective
Overview
1. An Overview of the Firms Financial
Statements
2. The Income Statement
3. Corporate Taxes
4. The Balance Sheet
5. The Cash Flow Statement
1
Learning Objectives
1. Understand the content of
Session 4: Forecasting Seasonal Revenues
Objectives:
Financial Management
Recognize seasonal variations in a firms income and indicate their importance to
financial, sales, marketing, and operational
Session 3: Forecasting Financial Statements
Objectives:
Financial Management
Use forecasts of annual sales and other considerations to forecast financial statements
as part of a firms long-range plan
ABC Ended December 31, 20X2 and 20X1
Income Statement for the YearsCOMPANY
Value in $ thousand, except EPS
20X2
Total Operating Revenues (or Total Sales Revenues)
$2,575.0
Less: Cost of Goods Sold (CO
Fi 307 Financial Modeling
Forecasting
Forecasting Revenues
Basing the future off of the past
Building revenues based on budgets
Optimism
Pessimism
Speed
Use of regression analysis.
See http:/en
A
B
C
D
E
$-
Intercept, $ million
Slope, $ million/year
Coeff. of Correlation, R
1,924.77
9,699.14
0.98369
Coeff. of Determination,
R^2
0.96765
LINEST Output for Linear Model
9699.14
1924.77
591.1246
The Condominium Project
Input data
Cost of project today (CNow)
Inflation rate (Infl)
Return on investment (Ret)
Collection growth rate (Grth)
Years till construction (NYrs)
$100,000
5.00%
8.00%
3.00%
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
B
(a)
Solution
(b)
Solution
(c)
Solution
(d)
Solution
C
D
E
F
G
H
I
J
K
L
M
N
O
What is the present value of a high-quality bond with a
A
B
C
D
E
F
G
1
I
J
KEYSTONE DEPARTMENT STORE
2
H
Cash Budget for First Six Months of Next Year
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
Sales (Actuals and Forecasts)
Nov
Dec
Jan
Feb
March
Ap
Ques
Use the PV command to find the present value of each of the following future cash flows at a discount rate of 10% per year, compounded monthly: (Warning: Be sure to
use the rate thats appropriate
Ques
Problem Three: Accounts Receivable and Inventory Turnover
Analysts maintain that two of the most important ratios are Inventory turnover and Accounts receivable turnover.
a. You are analysing ABC
ABC COMPANY
Income Statement for the Years Ended December 31, 20X2 and Forecast for Next 3 years
Values in $ thousand, except EPS
20X2
20X3
20X4
20X5
Total Operating Revenues (or Total Sales Revenues)
Year
0
1
2
3
4
5
Acct balance beg.
Year
$1,000.00
$1,100.00
$1,210.00
$1,331.00
$1,464.10
$1,610.51
Interest earned during year total in acct end of year
$100.00
$1,100.00
$110.00
$1,210.00
$121.00
$1
A
B
C
D
E
F
G
1
2
H
I
J
June
$ 600,000
6-month
Total
$ 2,875,000
KEYSTONE DEPARTMENT STORE
Cash Budget for First Six Months of Next Year
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2
Session 6: Cash Budgeting
Objectives:
Financial Management
Understand the purpose of cash budgeting and its role in a companys financial and operating
plans.
Recognize the various inputs required for