REQUIRED

Develop complete forecasts of Starbucks' income statements, balance sheets, and statements of cash ows for Years +1 through +5. As illustrated in this chapter, develop objective and unbiased forecast assumptions for all of Starbucks' future operating, investing, and nancing activities through Year +5 and capture those expectations using nancial statement forecasts.

SPECIFICATIONS

a. Build your own spreadsheets to develop and capture your nancial statement forecastassumptions and data for Starbucks. Building your own nancial statement forecast spread-sheets is a valuable learning experience. You can use the PepsiCo examples presentedthroughout this chapter as models to follow in building your spreadsheets. If you havealready had the learning experience of building forecast spreadsheets, you can build yournancial statement forecasts using the FSAP template for Starbucks that accompanies thisbook. If you want to start from scratch, you can download the blank FSAP template from thebook's website: www.cengagebrain.com and input the accounting data for Starbucks fromExhibits 10.14-10.16 into the Data Spreadsheet.

b. Starbucks' operating, investing, and nancing activities involve primarily opening andoperating company-owned retail coffee shops in the United States and around the world.Starbucks' annual reports provide useful data on the number of company-operated storesStarbucks owns, the new stores it opens each year, and the same-store sales growthrates. These data reveal that Starbucks' revenues and revenue growth rates differ signi-cantly across different segments. Use these data, summarized in Exhibit 10.17 as a basisto forecast (1) Starbucks' future sales from existing stores, (2) the number of new com-pany-operated stores Starbucks will open, (3) future sales from new stores, and (4) capitalexpenditures for new stores.

c. Starbucks' business also involves generating revenues from licensing Starbucks storesand selling Starbucks coffee and other products through foodservice accounts, grocerystores, warehouse clubs, and so on. Use the data in Exhibits 10.17 to build forecasts offuture revenues from licensing activities and foodservice and other activities.

d. Use your forecasts of capital expenditures for new stores together with Starbucks' data on property, plant, and equipment and depreciation to build a schedule to forecast property, plant, and equipment and depreciation expense as described in the chapter forPepsiCo.

e. Starbucks appears to use repurchases of common equity shares as the exible nancialaccount for balancing the balance sheet. Common equity share repurchases are similar todividends as a mechanism to distribute excess capital to common equity shareholders.Therefore, build your nancial statement forecasts using dividends as the exible nan-cial account.f. Save your forecast spreadsheets. In subsequent chapters, you will continue to use Starbucks as a comprehensive integrative case. In those chapters, you will apply the valuation models to your forecasts of Starbucks' future earnings, cash ows, and dividends to assess Starbucks' share value.