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Operating Assumptions: Sales will grow at 7% per year in the next 5 years. Cost of sales will be 67% of total sales in the next 5 years. SG&A will be 17% of total sales in the next 5 years. Annual Depreciation and Amortization increases by 60 in each of the next 5 years. Capital expenditure (Capex) will be 1,200 in each of the next 5 years. Income Statement Assumptions: Interest and investment income is 2.5% of the ending Cash & Short-Term Investments in the previous year. Interest rate on debt is 5% based on the ending ST Debt & Curr. Portion LT Debt and Long-Term Debt in the previous year. Tax rate is assumed to be 21%. 1,184 million common shares outstanding. Dividend payout ratio = 50% Working Capital Assumptions In the next 5 years, AR to Sales ratio remains the same as that in the most recent fiscal year (FY2017). In the next 5 years, Inventory to COGS ratio remains the same as that in the most recent fiscal year (FY2017). In the next 5 years, Other current assets to Sales ratio remains the same as that in the most recent fiscal year (FY2017). In the next 5 years, AP to COGS ratio remains the same as that in the most recent fiscal year (FY2017). In the next 5 years, Income Tax Payable to Sales ratio remains the same as that in the most recent fiscal year (FY2017). In the next 5 years, Other current liabilities to Sales ratio remains the same as that in the most recent fiscal year (FY2017). Assets Assumptions: Intangible assets grows at the same rate as sales (7%) in the next 5 years Deferred tax assets grows at the same rate as sales (7%) in the next 5 years Other assets grows at the same rate as sales (7%) in the next 5 years Deferred tax liabilities grows at the same rate as sales (7%) in the next 5 years Other liabilities grows at the same rate as sales (7%) in the next 5 years Debt Assumptions Short-term debt increases by 2% in each year. Long-term debt decreases by 8% each year. Valuation Assumptions Future annual cash flow from assets (CFFA) growth rate (beyond 2022) is assumed to be 5%. Weighted average cost of capital (WACC) is 9%. 2. Create projected income statements for years 2018, 2019, 2020, 2021, and 2022 based on the historical financial statements as well as the information provided in the Assumptions worksheet. FY2019 FY2020 FY2021 FY2022 Net sales Cost of goods sold Gross profit Selling, general and administrative (SG&A) Depreciation and amortization Operating income (EBIT) Interest and investment income FY2015 FY2016 FY2017 FY2018 88,519 94,595 100,904 -58,254 -62,282 -66,548 30,265 32,313 34,356 -16,801 -17,132 -17,864 -1,690 -1,754 -1,811 11,774 13,427 14,681 166 36 74 -919 -972 -1,057 11,021 12,491 13,698 -4,012 -4,534 -5,068 7,009 7,957 8,630 Interest expense Pre-Tax Income Income taxes Net earnings / loss Net sales Cost of goods sold Gross profit Selling, general and administrative (SG&A) Depreciation and amortization Operating income (EBIT) Interest and investment income Interest expense Pre-Tax Income Income taxes Net earnings / loss FY2015 FY2016 FY2017 88,519 94,595 100,904 -58,254 -62,282 -66,548 30,265 32,313 34,356 -16,801 -17,132 -17,864 -1,690 -1,754 -1,811 11,774 13,427 14,681 166 36 74 -919 -972 -1,057 11,021 12,491 13,698 -4,012 -4,534 -5,068 7,009 7,957 8,630
