complete a five-year forecast using a 10% growth rate. Use long-term debt as the plug. Show the resulting cash flows (OCF, NCS, Change in NWC, FCF, CFC, CFS).
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Akash M.
Chapter 5 Problem 1: Using the data in the student spreadsheet file P&G.xlsx (to find the student spreadsheets for Financial Analysis with Microsoft Excel, seventh edition, go to www.cengagebrain.com), forecast the June 30, 2014, income statement and balance sheet for Procter & Gamble. Use the percent of sales method and the following assumptions: (1) Sales in FY 2014 will be $85,000; (2) The tax rate will be 25.24%; (3) Each item that changes with sales will be the five-year average percentage of sales; (4) No preferred dividends will be paid; and (5) The common dividend payout ratio will be 50% of income available to common stockholders. Use your judgment on all other items. a. What is the discretionary financing need in 2014? Is this a surplus or deficit? c. Create a chart of cash vs. sales and add a linear trend line. Is the cash balance a consistent percentage of sales? Does the relationship fit your expectations? e. Turn off iteration and use the Scenario Manager to set up three scenarios: 1) Best Case - Sales are 5% higher than expected. 2) Base Case - Sales are exactly as expected. 3) Worst Case - Sales are 5% less than expected. What is the DFN under each scenario?
Suppose that Wall-E Corp. currently has the balance sheet shown below, and that sales for the year just ended were $6.9 million. The firm also has a profit margin of 30 percent, a retention ratio of 20 percent, and expects sales of $8.9 million next year. Fixed assets are currently fully utilized, and the nature of Wall-E’s fixed assets is such that they must be added in $1 million increments. Current assets: $1,449,000 Current liabilities: $1,725,000 Fixed assets: $4,761,000 Long-term debt: $1,550,000 Equity: $2,935,000 Total assets: $6,210,000 Total liabilities and equity: $6,210,000 If current assets and current liabilities are expected to grow with sales, what amount of additional funds will Wall-E need from external sources to fund the expected growth?
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