Go back to problem 12 and build a financial planning model based on percentage of sales for

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Go back to problem 12 and build a financial planning model based on percentage of sales for Eagle Sports Supply using a spreadsheet similar to Figure 19.2.

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a. Assume 2013 sales grow at the sustainable growth rate calculated in problem 13 and produce the pro forma income statement and balance sheet. Is the forecasted capital structure consistent with 2012 capital structure?
b. Assuming 2013 sales grow at the internal growth rate calculated in problem 13, produce the pro forma income statement and balance sheet. Is the required external financing zero, the same as what you found in problem 13? Is the forecasted net income the same as the forecasted net income in problem 13? What is going on?
c. Calculate an alternative growth rate using the following formula.
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The ROE is the same as the one used in the other growth rate formulas. It is based on beginning equity, 2012 net income/2011 equity. Use this new growth rate to produce the 2013 pro forma statements. What is the required external financing? How does it compare to the result in 34(b)?
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Fundamentals of Corporate Finance

ISBN: 978-1259024962

6th Canadian edition

Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim

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