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Walmart Walmart Stores, Inc. (Walmart) is the largest retailing firm in the Building on a base discount Walmart has expan&d into warehouse dubs and Supercenters. which sell tiond discmmt store items and grocery Exhibits 10.10, 10.11. 10.12 present the fi- nancial staternents Walrnart for 20132015. 4.504.52 (Case 4.2 in Chapter 4) o present summuy financial statements for Walrnart. and 4.53 selected financial staternent ratios Yeus 20132015. (tbte: A few of the unounts gyesented in Chapter 4 Walrtwt differ from unounts provided here for purposes of fi- nancial analysis ratios. the 4 data have adjusted slightly to remove the effects items such as discontinued operatbns.) REQUIRED (additional requirements follow on page 714) a. a spreadsheet and prepue a set fruncial staternent for Walmut f Year C 2018 Learn ng_ Walmart presented (mless indicated otherwise) beginning with the incorne staternent. then the baluxe sheet, and then the statement cash this of the case, assurne that Walmart will exercise its financial flexibility with the cash and cash equivaknts accmjnt to balance the balance sheet. Exhibit 10.10 Walmart Stores, Inc. Balance Sheets (amounts in millions; allow for rounding) (Integrative Case 10.1) Cash and cash equivalents Accounts and notes receivablenet Inventories Prepaid expenses and other current assets Current assets of discontinued segments Current Assets Property. plant. and equipmentat cost Accumulated depreciation Other assets Total Assets Liabilities and Equities Accounts payable Current accrued expenses Notes payable and short-term debt Current maturities of long-term debt Incorne taxes payable Current liabilities of discontinued operatiorts Current Liabilities Long-term debt Deferred tax liabilitiesnoncurrent Redeemable noncontrolling interest Total Liabilities Common stock + Additional paid-in capital Retained eamings Accum. other comprehensive income (loss) Total Common Shareholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equities 2014 S 7281 6677 44858 1.909 $ 61,185 178.678 (0771) 19,510 6.149 $204,751 S 37A15 18793 7670 4,412 89 $ 69,345 44.559 817 IA91 $123A12 76,566 (2.9%) s 76,255 5084 $ 81,339 $204,751 710 not scan CH R 10 Statements Exhibit 10.11 Walmart Stores, Inc. Income Statements (amounts in millions; allow for rounding) (Integrative Case 10.1) 2015 S 9,135 6.778 45.141 2,224 S 63,278 182.634 (65.979) 18,102 5A55 $203,490 S 38.410 19.152 1592 5,078 1,021 s 65.253 43,495 $117S53 2,785 85,777 (7.168) $ 81,394 4.543 S 85,937 S203,490 2015 s 485651 (365.086) s 120,565 Cost of goods sold Gross Profit Selling, general, and administrative expenses Operating Profit Interest income Interest expense Income before Tax Income tax expense Income (Loss) from discontinued operations Net Income Net incorne attributable to noncontrolling interests Net Income Attributable to Commm Shareholds Other cornprehensive income items Comprehensive Income 2014 S 476.294 (358069) $ 118,225 (91,353) $ 26,872 119 (2,335) 24,656 (8,105) 144 S 16,695 (673) 16,022 (2.409) 13613 (93,418) 27,147 113 (2.461) $ 24,799 (7,985) 285 $ 17099 (736) $ 16,363 (4.172) 12,191 Exhibit 10.12 Walmart Stores, Inc. Statements of Cash Flows (amounts in millions, allow for rounding) (Integrative Case 10.1) Net Income Add back depreciation and amortization expenses Deferred income taxes (Increase) Decrease in accounts receivable (Increase) Decrease in inventories Increase (Decrease) in accounts payable Increase (Decrease) in income taxes payable Increase (Decrease) in other current liabilities (Income) Loss from discontinued segrnents Other operating cash flows Net Cash Flow from Activities 2014 S 16695 8,870 (279) (566) (1667) 531 (1,224) 103 (144) 938 S 23,257 2015 S 17,099 9.173 (503) (569) (1229) 2,678 166 1.249 (285) S 28,564 2016 S 8,705 5624 44,469 1441 S 60,239 188054 (71,538) 16695 6,131 $199,581 s 38.487 19607 2,708 3,296 521 s 64,619 44,030 7,321 $115,970 2.122 9021 (11,597) $ 80,546 3,065 S 83611 $199,581 2016 S 482.130 (360.984) $121,146 (97041) 24,105 81 S 21 $38 (6,558) S 1580 (386) $ 14694 (4A29) $ 10,265 2016 $ 15,080 9,454 (672) (19) (703) (472) 1303 IAIO S 27,389 (Continued) Exhibit 10.12 (Continued) Proceeds from sales of property, plant. and equipment Property, plant, and equipment acquired Investrnents acquired Other investrnent transactions Net Cash Flow from Investing Activities Increase (Decrease) in short-term borrowing Increase (Decrease) in long-term borrowing Share repurchasestreasury stock Dividend payments Other financing activities Net Cash Flow from Financing Activities Effects of exchange rate changes on cash Net Change in Cash Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 2014 727 (13,115) (138) 911 2104 (6,683) (6,139) (982) (442) (500) 7.781 7,281 2015 74) 479 (6288) 1.270 (1 ,015) (6.185) (2353) S S (514) S 1,854 S 7,281 S 9,135 711 2016 635 (11,477) 167 $110,675) 1.235 (4,393) (4,112) (6,294) (2,558) $116,122) (1,022) S (430) s 9,135 S 8,705 712 714 Income Statement Forecast Assumptions Sales Sales grew by 16% in 2014 2.0% 2015. but feu 0.7% in 2016. The canpmjnd annual sales growth rate during the last three years was only 06%. Walmart sdes growth prirnarily through increasing sales. and acquiring In the future. Wdrnart will hkely cmtinue to grow in markets by opening stores and xquiring other firms and in US. mukets by cmverting dscount to Supercenters. In cornpetitm Walmut will likely cmtiru to Fner- ate steady increases in same-store sales, consistent with its through 2016. Assume that sales will grow 2m each year frorn Year +1 thrmgh Year +5. Cost of Goods Sold The percentage of costs of goods sdd relative to sales decreased slightly from 75.2% sdes in 2014 and 2015 to in 2016. Wdrnart's everyday strategy, its movernent into grocery and canpetitim wdl likely Walmart from ing significant reductions in this expense percentaF. Assurne that cost of to sales percentage be 750% fry Year +1 to Yeu +5. Selling and Administrative Expenses arxi adrninstrative expen percentage has irrreased slightly from 19.2% of sdes in 2014 2015 to 20.1% 2016 W*nart has strmg cost contd wer tt years. and is to contirue to exhibit such cmtrd. Assurne that afinistrative expens Yeu + 1 to Year +5. Interest Income earns interest incorr on its and cash equivalents accmjnts. The average Witerest rate earned on average cash balances was awoxirnatety during 2016, a than the rates earned in 2014 2015 (16% 1.4%. Assume that Walrnart will eam interest income based on a 1.5% interest rate average cash balances (that ist Year +5. &te. Pr*cting the anxunt of interest irrorrr must of cash the baluxe sheet.) CH APTE R 10 Statements Interest Expense Wdrnart uses lmg-term rntgages and leases to finance stores and warehouses and and debt to firwxe The average interest rate interestå debt and leases was approxirnately 46% and 5.1% during 2015 and 2016, respectively. Assume a 5m interest rate for au outstancfing borrowir.g (short-term and long-term debt. leases. nd the current long-term det*) Wdrn&t for Year +1 thrmagh Year +5. GTIBJte interest expense on average of interest-bearing debt exh year. (Note: Pr*cting the unount interest expense rnust await of the interest-bearing debt xcounts on the balance sheet.) Income rax Expense Wnart's average tax rate as a percentage of incorre before taxes has roughly 31.8% during last three years. that Walmarfs effective inccyne tax rate 32N before taxes for Year +1 through Yeu +5. (Note: Pro- jecting the arnount incorne tax expense must cornputation of before taxes.) Net Income Attributable to Noncontrolling Interests NoncontrdUng interest in Walrnart subsidiaries vre entitled to a SM million share in Walmart's 2016 net inconp. which armunted to rmjghly a 126% rate return mestrnent. Assume that the incorne attritJtable to noncontrdling in future wdl continue to arnmmt to a 12.6% rate return in Yeu +1 Year +5. Balance Sheet Forecast Assumptions Cash We will cash as the firwlcial accmnt to equate assets with total liabil- ities plus shar&lders' equity. Pr*cting the arnwnt of cash must await projectims of all ottrr sheet Accounts Receivable As a retauer. a large portion of Walmart's sales are in cash or for third-party credit card charges. which Walmart can convert into cash within a day or two. Walmart has its own credit card that custorners can use for purchases at its Sam's Club war&use stores. but the total amount of receivables outstanding on these credit cards is relatively rninor compared to Walmart's total sales. As a consequence. Walmart's receivables turnover is very steady and fast. averaging roughly five days during each of the past two years. Assume that accounts receivable will cmtinue to turn over at the same rate and increase at the growth rate in sales. Inventories Wdrnart's overall inventory efficiency has steady over the past three years turnover has averaged 45 days in 2014. 2015, nd 2016. Assume that ending inventory cmtinue to be equal to 45 days of cost of goods soH, in Year +1 to Year +5. Prepaid Expenses Current assets indude grepayments ogrrating costs such as rent md insurnce. Assurt* that will grow at the growth rate in sdes. Current Assets and Liabilities of Discontinued Segments Wdrnart's 2014 balance recognized armunts as current assets and current liabilities that are associated with ciscontin- ued segments (subsidihs that Walrn&t is Ovesting). Walrnart divested these operatims in fis- cal 2015, so assurt* that these WiB be zero in Year +1 thrmjgh Year +5. Property, Plant, and EquipmentAt Cost With regard to ard equipnrnt copyright 2018 assets&M tures of proceeds frm selling property. plant. and equiprt*-nt) have declined from rwghW Walmart $12.4 billbn in 2014. to 5116 in 2015, to 510.8 in 2016. Assurne that spending on new plant. and equipnrnt be SIOD bilim each year frun Year +1 through +5. Accumulated Depreciation In 2015 and 2016. Walmart equipment using an average useful life 19.7 years. For Yeu +1 through Year +5. assume that accumulated &preciatbn wil increase exh year by degeciation sirtWicity. cornpute expense based on average 20-year useful Ife and zero salvage value. In depreciation expense exh yeu. sure &geci- ate the beginning balance in the existing property, plat. and equigxnentat cost Also add a layer of depreciatbn expense the new pl<. equisynent acquired through capital expenditures. Assurne that Wdmart a fun year of depreciatim on new property. plant. nd equiprrwn in the frst yeu of service. Goodwill and Other Assets GoodwiU c*her assets inch& prinurily goodwiU arising frm corporate acquisitbns mjtsi& the United States Such increase Walmart sales. Assume that goodi.vi] and other assets win grow at the rate as Also that and other assets are not arnortizable, and that no chuges be needed. Accounts Payable Walmart has a steady accounts payaue with payrnent periods 9.5 tinps per year (m turnover of rmjghly 38 days) during the last three years. Assume that ending xcounts payable wdl cmtinue to 38 days in- ventory in Yus +1 to +5. To ending accounts payaue balance using a 38-day rertwntx to the change in mentory to cost pods sdd to obtain the total arnmjnt of credit purchases of inventory during the yeu. Accrued Liabilities Accrued relate to accnrd expenses for ongoing operating activ- ities and are expected to grmv at growth rate which are expected to grow with sales. Income Taxes Payable and Deferred Tax LiabilitiesNoncurrent For sinvhcity. assurne that irxome taxes pay& deferred tax at 2.0% per year in Year +1 through Yeu +5. Short-Term Debt. Current Maturities of Long-Term Debt. and Long-Term Debt Walrnart uses short-term &bt, current of bng-term &bt. lmg-term debt to agrnent cash from operations to finance capital on plant. and equinent and acquisitions of existing outside the United States. Deer two years, individ- ual of debt financing debt. current maturities of bng-term debt. lmg- term &bt) have fluctuated year to year. wtkreas the aggregate has remained steady, roughly 25m total assets F simplicity. assure that the armunt wdl continue to rernl a of total assets Year +1 through Year +5. Assurne that Wdrnarfs short-term current rnaturities lmg- term debt. and lmg-term debt WiM grow at year Yeu + 1 Yeu +5, rm.ly consistent with the pr*cted growth in total assets. Common Stock and Additional Paid-in Capital past three years, Wdrturfs corn- mon stock and additional casn have averaged approximately 1.2% of total assets. m" WCN and executives to satisfy stock exercises.) Assume that equity final,cing CHAPTER 10 Forecasting Finarxid Statements continue to be 1.2% total assets for Yu +1 thrmgh Yu +5. Assume that Walrnart's mon stock and wil grow at 3.0% year in Year +1 thrmjgh Year +5, roughly cmsistent with the projected growth in total assets. Retained Earnings increase in retained earnings equals net incorne minus dividends Shue repurchases In 2016, Walrnart paid tO dividends of 56.294 rWUim to cornrrwl shue- holders. which arnounted to roughly 42% of rrt irxorne attributable to Wdrnart shareholders. Assume that Walmart will a to dividends to 42% of net income attritJtaue to Walrnart stwehokiers in Year +1 through Year +5. In Walnurt has used varying arnounts of cash to shues: $6.83 millim in 2014. S 1,015 mil- lion in 2015. and 54.112 in 2016. Assurne that Wdmart use 54,000 rnilbn per year to repurchase commm shares in Year +1 Year +5. Accumulated Other Comprehensive Income Assurne that other Sive incorne nM change. Equivalently, assurne that future other incorne items wdl be zero, on average, in Year +1 through Year +5. Noncontrolling Interests Noncontrolling interests arnount to equity investments made by third-party investors that Wdrnart cmtrols and cmsdidates NoncmtroUing interests grow exh year by their share of the these 713 Walmart Walmart Stores, Inc. (Walmart) is the largest retailing firm in the Building on a base discount Walmart has expan&d into warehouse dubs and Supercenters. which sell tiond discmmt store items and grocery Exhibits 10.10, 10.11. 10.12 present the fi- nancial staternents Walrnart for 20132015. 4.504.52 (Case 4.2 in Chapter 4) o present summuy financial statements for Walrnart. and 4.53 selected financial staternent ratios Yeus 20132015. (tbte: A few of the unounts gyesented in Chapter 4 Walrtwt differ from unounts provided here for purposes of fi- nancial analysis ratios. the 4 data have adjusted slightly to remove the effects items such as discontinued operatbns.) REQUIRED (additional requirements follow on page 714) a. a spreadsheet and prepue a set fruncial staternent for Walmut f Year C 2018 Learn ng_ Walmart presented (mless indicated otherwise) beginning with the incorne staternent. then the baluxe sheet, and then the statement cash this of the case, assurne that Walmart will exercise its financial flexibility with the cash and cash equivaknts accmjnt to balance the balance sheet. Exhibit 10.10 Walmart Stores, Inc. Balance Sheets (amounts in millions; allow for rounding) (Integrative Case 10.1) Cash and cash equivalents Accounts and notes receivablenet Inventories Prepaid expenses and other current assets Current assets of discontinued segments Current Assets Property. plant. and equipmentat cost Accumulated depreciation Other assets Total Assets Liabilities and Equities Accounts payable Current accrued expenses Notes payable and short-term debt Current maturities of long-term debt Incorne taxes payable Current liabilities of discontinued operatiorts Current Liabilities Long-term debt Deferred tax liabilitiesnoncurrent Redeemable noncontrolling interest Total Liabilities Common stock + Additional paid-in capital Retained eamings Accum. other comprehensive income (loss) Total Common Shareholders' Equity Noncontrolling interests Total Equity Total Liabilities and Equities 2014 S 7281 6677 44858 1.909 $ 61,185 178.678 (0771) 19,510 6.149 $204,751 S 37A15 18793 7670 4,412 89 $ 69,345 44.559 817 IA91 $123A12 76,566 (2.9%) s 76,255 5084 $ 81,339 $204,751 710 not scan CH R 10 Statements Exhibit 10.11 Walmart Stores, Inc. Income Statements (amounts in millions; allow for rounding) (Integrative Case 10.1) 2015 S 9,135 6.778 45.141 2,224 S 63,278 182.634 (65.979) 18,102 5A55 $203,490 S 38.410 19.152 1592 5,078 1,021 s 65.253 43,495 $117S53 2,785 85,777 (7.168) $ 81,394 4.543 S 85,937 S203,490 2015 s 485651 (365.086) s 120,565 Cost of goods sold Gross Profit Selling, general, and administrative expenses Operating Profit Interest income Interest expense Income before Tax Income tax expense Income (Loss) from discontinued operations Net Income Net incorne attributable to noncontrolling interests Net Income Attributable to Commm Shareholds Other cornprehensive income items Comprehensive Income 2014 S 476.294 (358069) $ 118,225 (91,353) $ 26,872 119 (2,335) 24,656 (8,105) 144 S 16,695 (673) 16,022 (2.409) 13613 (93,418) 27,147 113 (2.461) $ 24,799 (7,985) 285 $ 17099 (736) $ 16,363 (4.172) 12,191 Exhibit 10.12 Walmart Stores, Inc. Statements of Cash Flows (amounts in millions, allow for rounding) (Integrative Case 10.1) Net Income Add back depreciation and amortization expenses Deferred income taxes (Increase) Decrease in accounts receivable (Increase) Decrease in inventories Increase (Decrease) in accounts payable Increase (Decrease) in income taxes payable Increase (Decrease) in other current liabilities (Income) Loss from discontinued segrnents Other operating cash flows Net Cash Flow from Activities 2014 S 16695 8,870 (279) (566) (1667) 531 (1,224) 103 (144) 938 S 23,257 2015 S 17,099 9.173 (503) (569) (1229) 2,678 166 1.249 (285) S 28,564 2016 S 8,705 5624 44,469 1441 S 60,239 188054 (71,538) 16695 6,131 $199,581 s 38.487 19607 2,708 3,296 521 s 64,619 44,030 7,321 $115,970 2.122 9021 (11,597) $ 80,546 3,065 S 83611 $199,581 2016 S 482.130 (360.984) $121,146 (97041) 24,105 81 S 21 $38 (6,558) S 1580 (386) $ 14694 (4A29) $ 10,265 2016 $ 15,080 9,454 (672) (19) (703) (472) 1303 IAIO S 27,389 (Continued) Exhibit 10.12 (Continued) Proceeds from sales of property, plant. and equipment Property, plant, and equipment acquired Investrnents acquired Other investrnent transactions Net Cash Flow from Investing Activities Increase (Decrease) in short-term borrowing Increase (Decrease) in long-term borrowing Share repurchasestreasury stock Dividend payments Other financing activities Net Cash Flow from Financing Activities Effects of exchange rate changes on cash Net Change in Cash Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year 2014 727 (13,115) (138) 911 2104 (6,683) (6,139) (982) (442) (500) 7.781 7,281 2015 74) 479 (6288) 1.270 (1 ,015) (6.185) (2353) S S (514) S 1,854 S 7,281 S 9,135 711 2016 635 (11,477) 167 $110,675) 1.235 (4,393) (4,112) (6,294) (2,558) $116,122) (1,022) S (430) s 9,135 S 8,705 712 714 Income Statement Forecast Assumptions Sales Sales grew by 16% in 2014 2.0% 2015. but feu 0.7% in 2016. The canpmjnd annual sales growth rate during the last three years was only 06%. Walmart sdes growth prirnarily through increasing sales. and acquiring In the future. Wdrnart will hkely cmtinue to grow in markets by opening stores and xquiring other firms and in US. mukets by cmverting dscount to Supercenters. In cornpetitm Walmut will likely cmtiru to Fner- ate steady increases in same-store sales, consistent with its through 2016. Assume that sales will grow 2m each year frorn Year +1 thrmgh Year +5. Cost of Goods Sold The percentage of costs of goods sdd relative to sales decreased slightly from 75.2% sdes in 2014 and 2015 to in 2016. Wdrnart's everyday strategy, its movernent into grocery and canpetitim wdl likely Walmart from ing significant reductions in this expense percentaF. Assurne that cost of to sales percentage be 750% fry Year +1 to Yeu +5. Selling and Administrative Expenses arxi adrninstrative expen percentage has irrreased slightly from 19.2% of sdes in 2014 2015 to 20.1% 2016 W*nart has strmg cost contd wer tt years. and is to contirue to exhibit such cmtrd. Assurne that afinistrative expens Yeu + 1 to Year +5. Interest Income earns interest incorr on its and cash equivalents accmjnts. The average Witerest rate earned on average cash balances was awoxirnatety during 2016, a than the rates earned in 2014 2015 (16% 1.4%. Assume that Walrnart will eam interest income based on a 1.5% interest rate average cash balances (that ist Year +5. &te. Pr*cting the anxunt of interest irrorrr must of cash the baluxe sheet.) CH APTE R 10 Statements Interest Expense Wdrnart uses lmg-term rntgages and leases to finance stores and warehouses and and debt to firwxe The average interest rate interestå debt and leases was approxirnately 46% and 5.1% during 2015 and 2016, respectively. Assume a 5m interest rate for au outstancfing borrowir.g (short-term and long-term debt. leases. nd the current long-term det*) Wdrn&t for Year +1 thrmagh Year +5. GTIBJte interest expense on average of interest-bearing debt exh year. (Note: Pr*cting the unount interest expense rnust await of the interest-bearing debt xcounts on the balance sheet.) Income rax Expense Wnart's average tax rate as a percentage of incorre before taxes has roughly 31.8% during last three years. that Walmarfs effective inccyne tax rate 32N before taxes for Year +1 through Yeu +5. (Note: Pro- jecting the arnount incorne tax expense must cornputation of before taxes.) Net Income Attributable to Noncontrolling Interests NoncontrdUng interest in Walrnart subsidiaries vre entitled to a SM million share in Walmart's 2016 net inconp. which armunted to rmjghly a 126% rate return mestrnent. Assume that the incorne attritJtable to noncontrdling in future wdl continue to arnmmt to a 12.6% rate return in Yeu +1 Year +5. Balance Sheet Forecast Assumptions Cash We will cash as the firwlcial accmnt to equate assets with total liabil- ities plus shar&lders' equity. Pr*cting the arnwnt of cash must await projectims of all ottrr sheet Accounts Receivable As a retauer. a large portion of Walmart's sales are in cash or for third-party credit card charges. which Walmart can convert into cash within a day or two. Walmart has its own credit card that custorners can use for purchases at its Sam's Club war&use stores. but the total amount of receivables outstanding on these credit cards is relatively rninor compared to Walmart's total sales. As a consequence. Walmart's receivables turnover is very steady and fast. averaging roughly five days during each of the past two years. Assume that accounts receivable will cmtinue to turn over at the same rate and increase at the growth rate in sales. Inventories Wdrnart's overall inventory efficiency has steady over the past three years turnover has averaged 45 days in 2014. 2015, nd 2016. Assume that ending inventory cmtinue to be equal to 45 days of cost of goods soH, in Year +1 to Year +5. Prepaid Expenses Current assets indude grepayments ogrrating costs such as rent md insurnce. Assurt* that will grow at the growth rate in sdes. Current Assets and Liabilities of Discontinued Segments Wdrnart's 2014 balance recognized armunts as current assets and current liabilities that are associated with ciscontin- ued segments (subsidihs that Walrn&t is Ovesting). Walrnart divested these operatims in fis- cal 2015, so assurt* that these WiB be zero in Year +1 thrmjgh Year +5. Property, Plant, and EquipmentAt Cost With regard to ard equipnrnt copyright 2018 assets&M tures of proceeds frm selling property. plant. and equiprt*-nt) have declined from rwghW Walmart $12.4 billbn in 2014. to 5116 in 2015, to 510.8 in 2016. Assurne that spending on new plant. and equipnrnt be SIOD bilim each year frun Year +1 through +5. Accumulated Depreciation In 2015 and 2016. Walmart equipment using an average useful life 19.7 years. For Yeu +1 through Year +5. assume that accumulated &preciatbn wil increase exh year by degeciation sirtWicity. cornpute expense based on average 20-year useful Ife and zero salvage value. In depreciation expense exh yeu. sure &geci- ate the beginning balance in the existing property, plat. and equigxnentat cost Also add a layer of depreciatbn expense the new pl<. equisynent acquired through capital expenditures. Assurne that Wdmart a fun year of depreciatim on new property. plant. nd equiprrwn in the frst yeu of service. Goodwill and Other Assets GoodwiU c*her assets inch& prinurily goodwiU arising frm corporate acquisitbns mjtsi& the United States Such increase Walmart sales. Assume that goodi.vi] and other assets win grow at the rate as Also that and other assets are not arnortizable, and that no chuges be needed. Accounts Payable Walmart has a steady accounts payaue with payrnent periods 9.5 tinps per year (m turnover of rmjghly 38 days) during the last three years. Assume that ending xcounts payable wdl cmtinue to 38 days in- ventory in Yus +1 to +5. To ending accounts payaue balance using a 38-day rertwntx to the change in mentory to cost pods sdd to obtain the total arnmjnt of credit purchases of inventory during the yeu. Accrued Liabilities Accrued relate to accnrd expenses for ongoing operating activ- ities and are expected to grmv at growth rate which are expected to grow with sales. Income Taxes Payable and Deferred Tax LiabilitiesNoncurrent For sinvhcity. assurne that irxome taxes pay& deferred tax at 2.0% per year in Year +1 through Yeu +5. Short-Term Debt. Current Maturities of Long-Term Debt. and Long-Term Debt Walrnart uses short-term &bt, current of bng-term &bt. lmg-term debt to agrnent cash from operations to finance capital on plant. and equinent and acquisitions of existing outside the United States. Deer two years, individ- ual of debt financing debt. current maturities of bng-term debt. lmg- term &bt) have fluctuated year to year. wtkreas the aggregate has remained steady, roughly 25m total assets F simplicity. assure that the armunt wdl continue to rernl a of total assets Year +1 through Year +5. Assurne that Wdrnarfs short-term current rnaturities lmg- term debt. and lmg-term debt WiM grow at year Yeu + 1 Yeu +5, rm.ly consistent with the pr*cted growth in total assets. Common Stock and Additional Paid-in Capital past three years, Wdrturfs corn- mon stock and additional casn have averaged approximately 1.2% of total assets. m" WCN and executives to satisfy stock exercises.) Assume that equity final,cing CHAPTER 10 Forecasting Finarxid Statements continue to be 1.2% total assets for Yu +1 thrmgh Yu +5. Assume that Walrnart's mon stock and wil grow at 3.0% year in Year +1 thrmjgh Year +5, roughly cmsistent with the projected growth in total assets. Retained Earnings increase in retained earnings equals net incorne minus dividends Shue repurchases In 2016, Walrnart paid tO dividends of 56.294 rWUim to cornrrwl shue- holders. which arnounted to roughly 42% of rrt irxorne attributable to Wdrnart shareholders. Assume that Walmart will a to dividends to 42% of net income attritJtaue to Walrnart stwehokiers in Year +1 through Year +5. In Walnurt has used varying arnounts of cash to shues: $6.83 millim in 2014. S 1,015 mil- lion in 2015. and 54.112 in 2016. Assurne that Wdmart use 54,000 rnilbn per year to repurchase commm shares in Year +1 Year +5. Accumulated Other Comprehensive Income Assurne that other Sive incorne nM change. Equivalently, assurne that future other incorne items wdl be zero, on average, in Year +1 through Year +5. Noncontrolling Interests Noncontrolling interests arnount to equity investments made by third-party investors that Wdrnart cmtrols and cmsdidates NoncmtroUing interests grow exh year by their share of the these 713 Noncontrolling Interests NoncontroUing interests arnount to emjity investments third-party investors in subsidaries that Wdrnut cmtrols and cmsdidates NoncmtroUing interests grow exh year by their share of the these interests decrea* by any civkiends paid to them. We purposes of incune staternent. that net income attributade to wmald a 126% rate return f those For sirnpkity, assurne that the &v'idends Walmart will pay to the nmcontrdling interest equd the ammant of net income attributa- bk to tirse noncontrdhng interests in Yeu +1 to Year +5. Tirrefore, of nmcm- trolling interests in equity wil remain constmt. Cash At tts pent. ymj cm of cash on Walmart's bdarxe at each frorn Year +1 to Year +5. that Wdnurt uses as flexibk fruncial account to bdance the balance steet. The resulting cash balmce each year should the total arnount of liablities and shareholders' equity minus the ending baluxes in all nm- cash asset accounts. Statement of Cash Flows Forecast Assumptions Depreciation Addback Include whkh equal change Xcu- mutated &preciatim. Other Addbacks Assur* that in other noncurrent the balance sheet are operating Other Investing Transactions Assurne that in other nmcurrent assets bal- ance sheet REQUIRED (continued from page 708) b. If ymj have crectly. tip arnmmt cash grows frun 513,675 miUim at ttk end Yeu +1 to a S44,459 mil- c 2018 cen...oe ttt so muxh cash cmJki create firurxial managernent of Walrnart. Massachusetts Stove Company Analyzing Strategk Options c. Suppose that Wdmart nmunces that it augment its pobcy by paying out 42% net incort* plus the an-wunt excess cash each year (if any). Assurne that during Year +1 to Year +5. Wdrnart will a cmstant $8,705 mdlion (the ending cash balance in 2016). Revise yajr forecast rnodel spread- sheets to change the financial account from cash to [ktermine total of cfvidends that Wdmart cmald pay each yu under this Identify me potential t*nefit that irxreased cou create firwo man"ement of Walmart. d. Calculate and cornp&e return equity for using the fecast arnounts determined in RequirertEnts a and c for Year +1 to Yu +5. Why the two sets of returns different? results Walmut's prefer? Why? 715