File Home Insert Page Layout Formulas Data Review View Help K4 fie A B D E F G H 2 3 Start with the partial model in the file Ch12 P10 Build a Model.xls x on the textbook's Web site, which contains the 4 2016 financial statements of Zieber Corporation. Forecast Zeiber's 2017 income statement and balance sheets. Use the 5 following assumptions: (1) Sales grow by 6%. (2) The ratios of expenses to sales, depreciation to fixed assets, cash 6 to sales, accounts receivable to sales, and inventories to sales will be the same in 2017 as in 2016. (3) Zeiber will not 7 issue any new stock or new long-term bonds. (4) The interest rate is 11% for long-term debt and the interest expense 8 on long-term debt is based on the average balance during the year. (5) No interest is earned on cash. (6) Regular 9 dividends grow at an 8% rate. (6) Calculate the additional funds needed (AFN). If new financing is required, assume it 10 will be raised by drawing on a line of credit with an interest rate of 12%. Assume that any draw on the line of credit 11 will be made on the last day of the year, so there will no additional interest expense for the new line of credit. If 12 surplus funds are available, pay a special dividend. 13 14 Key Input Data: Used in the 15 forecast 16 Tax rate 40% 17 Dividend growth rate 8% 18 Rate on notes payable-term debt, rstd 9% 19 Rate on long-term debt, ra 11% 20 Rate on line of credit, roc 12% 21 22 a. What are the forecasted levels of the line of credit and special dividends? (Hints: Create a column showing the 23 ratios for the current year; then create a new column showing the ratios used in the forecast. Also, create a 24 preliminary forecast that doesn't include any new line of credit or special dividends. Identify the financing deficit or 25 surplus in this preliminary forecast and then add a new column that shows the final forecast that includes any new 26 line of credit or special dividend.) 27 28 Begin by calculating the appropriate historical ratios in Column E. Then put these ratios and any other input ratios in 29 Column G. 30 31 Forecast the preliminary balance sheets and income statements in Column H. Don't include any line of credit or 32 special dividend in the preliminary forecast. 33 34 After completing the preliminary forecast of the balance sheets and income statement, go to the area below the 35 preliminary forecast and identify the financing deficit or surplus. Then use Excel's IF statements to specify the amount 36 of any new line of credit OR special dividend (you should not have a new line of credit AND a special dividend, only 37 one or the other). K4 fx E G H 2017 Preliminary forecast (doesn't include special dividend or LOC) 2017 Final forecast (includes special dividend or LOC) 2016 Historical 2017 Input 2016 ratios Forecasting basis ratios $455,150 Growth $386,878 % of sales $14,565 % of fixed assets $53,708 $11,880 Interest rate x average debt during year $0 $41,828 $16,731 $25,097 $12,554 Growth Zero in preliminary forecast $12,543 A B 43 44 Income Statements: 45 (December 31, in thousands of dollars) 46 47 48 Sales 49 Expenses (excluding depr. & amort.) 50 Depreciation and Amortization 51 EBIT 52 Interest expense on long-term debt 53 Interest expense on line of credit 54 EBT 55 Taxes (40%) 56 Net Income 57 58 Common dividends (regular dividends) 59 Special dividends 60 Addition to retained earnings 61 62 Balance Sheets 63 (December 31, in thousands of dollars) 64 65 66 Assets: 67 Cash 68 Accounts Receivable 69 Inventories 70 Total current assets 71 Fixed assets 72 Total assets 73 74 Liabilities and equity 75 Accounts payable 76 Accruals 77 Line of credit 78 Total current liabilities 79 Iona.term dat 2016 Historical ratios 2017 Preliminary forecast (doesn't include special dividend or LOC) 2017 Input ratios 2017 Final forecast (includes special dividend or LOC) 2016 Forecasting basis % of sales % of sales % of sales $18,206 $100,133 $45,515 $ 163,854 $182,060 $345,914 % of sales $31,861 $27,309 $0 $59,170 $120 non % of sales % of sales Zero in preliminary forecast Previous