1) Medtronic firm has $[(1,000,000*(A+B)+$55,000,000] in equity and $55,000,000 in debt and forecast $[(1,000,000*(C)+$22,000,000] in net income for the year. It currently pays dividends equal to [(A+B+C+D)]% of its net income. a. What would their internal growth rate be? NOTE: Answer in percentage. If your answer is 0.0405, then answer 4.05. b. What would their sustainable growth rate be? NOTE: Answer in percentage. If your answer is 0.0405, then answer 4.05. Integrated Financial Statements Exhibit A: Pro Forma Financial Statements 2019 2020 2021 2022 2023 2024 Income Statement 1 Sales Revenue $ 45,000.00 2 less: Cost of Goods Sold $ 36,900.00 3 EBITDA $ 8,100.00 4 less: Depreciation Expense $ 4.500.00 5 EBIT $ 3,600.00 6 less: Interest and Other Expenses $ 800.00 7 PRE-TAX INCOME $ 2,800.00 8 less: Income Tax $ 1,120.00 9 NET INCOME $ 1,680.00 S Production Volume (000s units) 1 Market Size 2 Market Share 3 Production Volume (Market Size X Market Share) 4 Average Sales Price 10,000.00 $ 10,500.00 $ 11,025.00 $ 11,576.25 $ 12,155.06 S 12.762.82 10.00% [10+(D/2)+21% (10+2*(D/2)+4]% [10+3*(D/2)+6]% [10+4*(D/2) +8]% [10+5*(D/2)+10 % 1000.00 $45.00 $45.90 $46.82 $47.75 $48.71 $49.68 DEPARTMENT OF BUSINESS AND ECONOMICS BBA 308 | EXAM 3 Corporation Finance Integrated Financial Statements Exhibit A: Pro Forma Financial Statements 2019 2020 2021 2022 2023 2024 Balance sheet 1 ASSETS 2 Cash and Equivalents $ 7,200.00 3 Accounts Receivable $ 6,300.00 4 Inventory $ 7,650.00 5 CURRENT ASSETS $ 21,150.00 6 Property, Plant and Equipment $ 29,700.00 7 TOTAL ASSETS $ 50,850.00 8 LIABILITIES AND EQUITY 9 Accounts Payable $ 10,350.00 10 CURRENT LIABILITIES $ 10,350.00 11 Long-Term Debt $ 8,000.00 12 TOTAL LIABILITIES $ 18,350.00 13 STOCKSHOLDER'S EQUITY S 32,500.00 14 Retained Earnings $ 15 TOTAL EQUITY $ 32,500.00 16 TOTAL LIABILITIES AND EQUITY $ 50,850.00 2021 Integrated Financial Statement Template Exhibit B: Free Cash Flow and Valuation 2019 2020 Income Statement 1 Sales Revenue 104,580.00 $ 143.224.40 S less: Cost of Goods Sold 73.206.00 $ 100,257.08 $ 3 EBITDA 31,374.00 $ 42,967.32 $ 4 less: Depreciation Expense 15,687.00 $ 21.483.66 $ 5 EBIT $ 15,687.00 $ 21,483.66 $ less: Interest and Other Expenses 405.00 S 405.00 $ 7 PRE-TAX INCOME 15,282.00 $ 21,078.66 $ 8 less: Income Tax S 6,876.90 $ 9485.40 $ 9 NET INCOME 8,405.10 $ 11,593.26 $ 187,455.11 131,218.58 56,236.53 29.118.27 28.118.27 4,230,00 23,888.27 10,749.72 13,138.55 35.557.20 $ 27.190.80 $ 24.053.40 $ 86,801.40 $ 62.748.00 $ 149,549.40 $ 48,696.30 s 37 238.34 $ 22.941.61 s 118,876.25 S 85,934.64 $ 204,810.89 $ 63.734.74 48,738.33 43,114.68 155.587.74 112,473.07 268,060.81 $ $ Balance Sheet ASSETS Cash and Equivalents Accounts Receivable Inventory 5 CURRENT ASSETS 6 Property, plant and Equipment 7 TOTAL ASSETS 8 UABILITIES AND EQUITY 9 Accounts Payable 10 CURRENT LIABILITIES 11 Long-Term Debt 12 TOTAL LIABILITIES 13 STOCK SHOLDER'S EQUITY 14 Retained Earnings 15 TOTAL EQUITY 16 TOTAL LIABILITIES AND EQUITY $ $ s 18,824.40 $ 18.824.40 $ 4,500.00 $ 23,324.40s 126.225.00 $ $ 126,225.00 $ 149,549.40 25.780.39 $ 25,780.39 $ 47,000.00 $ 72.780.39 $ 74,134.00 s 8.115.28 S 82.249.28 $ 155,029.68 33,741.92 33,741.92 47,000.00 80,741.92 74,134,00 9.196.98 83,330.98 164,072.90 Net Working Capital Requirements Qurrent Assets 2 Current Liabilities 3 Net Working Capital 4 Increase in Net Working Capital Capital Investment 1 Capital Investment 2500.00 45,000.00 7,500.00 Corporation Finance DEPARTMENT OF BUSINESS AND ECONOMICS BBA 308 | EXAM 3 Integrated Financial Statement Template Exhibit B: Free Cash Flow and Valuation 2019 2020 2021 Free Cash Flow (000s) Net Income 2 Plus: After-Tax Interes Expense Unlevered Net Income 4 Plus: Depreciation 5 Less: Increases in NWC 6 Less: Capital Expenditures 7 Free Cash Flow of Firm Valuation of the Growth 1 Free Cash Flow of the Firm 2 PV of the Cash Flow 3 Continuation Value 4 PV of Continuation Value 5 net Interest Expense 6 Interest Tax Shield 7 PV Interest Tax Shield 8 Firm Value 1) Medtronic firm has $[(1,000,000*(A+B)+$55,000,000] in equity and $55,000,000 in debt and forecast $[(1,000,000*(C)+$22,000,000] in net income for the year. It currently pays dividends equal to [(A+B+C+D)]% of its net income. a. What would their internal growth rate be? NOTE: Answer in percentage. If your answer is 0.0405, then answer 4.05. b. What would their sustainable growth rate be? NOTE: Answer in percentage. If your answer is 0.0405, then answer 4.05. Integrated Financial Statements Exhibit A: Pro Forma Financial Statements 2019 2020 2021 2022 2023 2024 Income Statement 1 Sales Revenue $ 45,000.00 2 less: Cost of Goods Sold $ 36,900.00 3 EBITDA $ 8,100.00 4 less: Depreciation Expense $ 4.500.00 5 EBIT $ 3,600.00 6 less: Interest and Other Expenses $ 800.00 7 PRE-TAX INCOME $ 2,800.00 8 less: Income Tax $ 1,120.00 9 NET INCOME $ 1,680.00 S Production Volume (000s units) 1 Market Size 2 Market Share 3 Production Volume (Market Size X Market Share) 4 Average Sales Price 10,000.00 $ 10,500.00 $ 11,025.00 $ 11,576.25 $ 12,155.06 S 12.762.82 10.00% [10+(D/2)+21% (10+2*(D/2)+4]% [10+3*(D/2)+6]% [10+4*(D/2) +8]% [10+5*(D/2)+10 % 1000.00 $45.00 $45.90 $46.82 $47.75 $48.71 $49.68 DEPARTMENT OF BUSINESS AND ECONOMICS BBA 308 | EXAM 3 Corporation Finance Integrated Financial Statements Exhibit A: Pro Forma Financial Statements 2019 2020 2021 2022 2023 2024 Balance sheet 1 ASSETS 2 Cash and Equivalents $ 7,200.00 3 Accounts Receivable $ 6,300.00 4 Inventory $ 7,650.00 5 CURRENT ASSETS $ 21,150.00 6 Property, Plant and Equipment $ 29,700.00 7 TOTAL ASSETS $ 50,850.00 8 LIABILITIES AND EQUITY 9 Accounts Payable $ 10,350.00 10 CURRENT LIABILITIES $ 10,350.00 11 Long-Term Debt $ 8,000.00 12 TOTAL LIABILITIES $ 18,350.00 13 STOCKSHOLDER'S EQUITY S 32,500.00 14 Retained Earnings $ 15 TOTAL EQUITY $ 32,500.00 16 TOTAL LIABILITIES AND EQUITY $ 50,850.00 2021 Integrated Financial Statement Template Exhibit B: Free Cash Flow and Valuation 2019 2020 Income Statement 1 Sales Revenue 104,580.00 $ 143.224.40 S less: Cost of Goods Sold 73.206.00 $ 100,257.08 $ 3 EBITDA 31,374.00 $ 42,967.32 $ 4 less: Depreciation Expense 15,687.00 $ 21.483.66 $ 5 EBIT $ 15,687.00 $ 21,483.66 $ less: Interest and Other Expenses 405.00 S 405.00 $ 7 PRE-TAX INCOME 15,282.00 $ 21,078.66 $ 8 less: Income Tax S 6,876.90 $ 9485.40 $ 9 NET INCOME 8,405.10 $ 11,593.26 $ 187,455.11 131,218.58 56,236.53 29.118.27 28.118.27 4,230,00 23,888.27 10,749.72 13,138.55 35.557.20 $ 27.190.80 $ 24.053.40 $ 86,801.40 $ 62.748.00 $ 149,549.40 $ 48,696.30 s 37 238.34 $ 22.941.61 s 118,876.25 S 85,934.64 $ 204,810.89 $ 63.734.74 48,738.33 43,114.68 155.587.74 112,473.07 268,060.81 $ $ Balance Sheet ASSETS Cash and Equivalents Accounts Receivable Inventory 5 CURRENT ASSETS 6 Property, plant and Equipment 7 TOTAL ASSETS 8 UABILITIES AND EQUITY 9 Accounts Payable 10 CURRENT LIABILITIES 11 Long-Term Debt 12 TOTAL LIABILITIES 13 STOCK SHOLDER'S EQUITY 14 Retained Earnings 15 TOTAL EQUITY 16 TOTAL LIABILITIES AND EQUITY $ $ s 18,824.40 $ 18.824.40 $ 4,500.00 $ 23,324.40s 126.225.00 $ $ 126,225.00 $ 149,549.40 25.780.39 $ 25,780.39 $ 47,000.00 $ 72.780.39 $ 74,134.00 s 8.115.28 S 82.249.28 $ 155,029.68 33,741.92 33,741.92 47,000.00 80,741.92 74,134,00 9.196.98 83,330.98 164,072.90 Net Working Capital Requirements Qurrent Assets 2 Current Liabilities 3 Net Working Capital 4 Increase in Net Working Capital Capital Investment 1 Capital Investment 2500.00 45,000.00 7,500.00 Corporation Finance DEPARTMENT OF BUSINESS AND ECONOMICS BBA 308 | EXAM 3 Integrated Financial Statement Template Exhibit B: Free Cash Flow and Valuation 2019 2020 2021 Free Cash Flow (000s) Net Income 2 Plus: After-Tax Interes Expense Unlevered Net Income 4 Plus: Depreciation 5 Less: Increases in NWC 6 Less: Capital Expenditures 7 Free Cash Flow of Firm Valuation of the Growth 1 Free Cash Flow of the Firm 2 PV of the Cash Flow 3 Continuation Value 4 PV of Continuation Value 5 net Interest Expense 6 Interest Tax Shield 7 PV Interest Tax Shield 8 Firm Value