Exam 18: Financial Modeling and Pro Forma Analysis

Calgary Doughnuts had sales of $100 million in 2007. Its cost of sales were $70 million. If sales are expected to grow at 20% in 2008, compute the forecasted costs using the percent of sales method.

Which of the following accounts may reasonably be expected to grow with sales? I. Accounts Receivable II. Accounts Payable III. Property, Plant and Equipment IV. Inventory V. Long-Term Debt

Use the information about Billy's Burgers to answer the following question(s): Billy's Burgers -Using the percent of sales method, and assuming 20% growth in sales, estimate Billy's Burgers' depreciation for 2011.

Internal growth rate indicates whether a planned investment will increase or decrease firm value.

Calgary Doughnuts had sales of $300 million in 2007. Its cost of sales were $200 million. If sales are expected to grow at 15% in 2008, compute the forecasted costs using the percent of sales method.

What is minimum required cash?

Calgary Doughnuts had sales of $200 million in 2007. Its cost of sales were $160 million. If sales are expected to grow at 10% in 2008, compute the forecasted costs using the percent of sales method.

The ________ method assumes that as sales grow, many income statement and balance sheet items will grow, remaining the same percent of sales.

What are a firm's options when it generates more cash than planned?

Long term financial planning helps a financial manager in budgeting but has little to do with understanding how the business operates.

How do we compute net new financing?

Use the tables for the question(s) below. Pro Forma Income Statement for Ideko, 2010-2015 Pro Forma Balance Sheet for Ideko, 2010-2015 -The amount of net working capital for Ideko in 2011 is closest to ________.

Compute the value of a firm with free cash flows of $9,000, $7,000, and $5,000 over the next three years, a terminal firm value of $30,000 after three years, and the unlevered cost of capital is 10%. Assume that the interest rate tax shield is zero.

One of the shortcomings of the percent of sales method is that it does not account for the fact that capacity changes are lumpy and not incremental.

Forecasting a balance sheet with percent of sales method requires two passes-a first pass to determine financing needs and a second pass that shows the sources and amounts of financing.