Excel file you can copy and use to look at the formulas). Build a forecasting model making the following the assumptions:

Assumptions

1. The company must pay off $100,000 of LTD each year.

2. On the first day of 2007 they will install a new machine that $200,000 and will be depreciated SL over 10 years.

3. On the first day of 2008 they will purchase a $100,000 machine to be depreciated over 10 years SL.

4. On the first day of 2009 they will purchase an $800,000 machine that will be depreciated over 10 years SL.

5. Assume stock can be sold for $25 a share and they initially have 25,000 shares outstanding.

Assignment

Copy the Excel Template which provides the spreadsheet given on the last page of the assignment to save having to make up your own spreadsheet.

Assume initially that all additional funding will be done with LTD. Forecast the spreadsheet using only LTD to balance the balance sheet. Notice that you will have to adjust interest to reflect the change in LTD.

Once you have the balance sheet balanced, then make 3 copies of the entire sheet (Use Edit, Move or Copy, check the box to copy, and pick the forecasting spreadsheet) and rename the spreadsheet.

1. Set up the following spreadsheets

A. Name the original spreadsheet LTD.

B. Name one of the other copies NP solve assuming you use NP for all funding.

C. Name one of the other copies CS solve assuming you use CS for all funding

D. Name one of the other copies Same DR assume you maintain the same debt ratio (approximately 49%) as in 2006, using LTD and CS to balance the spreadsheet.

2. Critique the various ways of financing future growth using the ratios to support your observations. Which financing approach would you recommend?

3. Print out the four solutions using portrait and force the spreadsheet onto one page only. Apply the heading (with your name and section) and data and time stamp each page. Print out one page with the forecasting formulas (you need only show two years).

4. Graphs. Make your graphs full page. Print out the graphs, using one graph for each ratio. Each graph should have four lines, one for each four years of each financing option.

5. Do sources and Uses for each scenario.