Need help with Financial Forecasting problem!


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Thanks Document Preview: Individual Assignment FIN328 Corporate Finance Policy Fall 2014 1 Financial Forecasting Using Excel The goal of this assignment is to 1. help you understand the relations among financial statement items 2. put EFN calculation in practice with Excel It is now late Year-Zero and you have just been handed the proformas for Year-Zero. You have a fair degree of confidence in these numbers since the fiscal year is about to finish and most of the numbers are already in. These proformas appear on the attached Excel spreadsheet. The task you have been assigned is to forecast the statements for Year-One. In order to carry out this task, you have obtained the following relevant information. The firm is forecasting a growth rate in sales of 50% over Year-Zero sales. In conversations with several old hands at the firm, you have determined that the “Cost of goods sold” item, which includes depreciation, has historically increased in a proportionate manner with sales, as have items like: Cash, Accounts Receivable, Inventory, Accounts Payable, Selling and Administrative Expenses, and Accrued Wages and Taxes. The cash from depreciation of existing fixed assets has historically been used to update those fixed assets, and so cannot be diverted to “new capital”. This implies that if no new fixed assets are purchased, net fixed assets for Year-One would remain the same number as in Year-Zero.1 To accommodate increased production for the new growth in sales, your boss has directed you to assume that the net fixed assets for Year-One will grow proportionately with sales. Your boss has also told you that the firm do not want to increase its financial risk (i.e. current ratio>=2.6 and debt ratio<=0.43) 2,3. The tax rate is assumed to be 35%, and the dividend payout ratio4 is to be maintained at 30% (as it was last year). If new shares are to be issued, it is assumed that these new shares will also receive the dividend. For purposes of interest payment computations, you have been told to... Attachments: Financial-For....pdf FIN-328-Forec....xlsx

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