Start with the partial model in the file Choo P10 Bulld Model.xlsx on the textbook's Web site, which contains the 2018 financial statements of Zleber Corporation. Forecast Zeiber's 2019 income statement and balance sheets. Use the following assumptions: (1) Sales grow by 6%. 2) The ration of expenses to sales, depreciation to fixed assets, cash to sales, accounts receivable to sales, and inventories to sales will be the same in 2019 as in 2018. (3) Zeiber will not issue any new stock or new long-term bonds. (4) The Interest rate is 11% for long term debt and the interest expense on long-term debt is based on the average balance during the year. (5) No interest is earned on cash. (6) Regular dividends grow at an 3% rate (6) Calculate the additional funds needed (AFN). If new financing is required, assume it 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 will be made on the last day of the year, so there will be no additional interest expense for the new line of credit. If surplus funds are available, pay a special dividend. Key Input Data: Used in the forecast 40% 8% 9% Tax rate Dividend growth rate Rate on notes payable-term debt, rstid Rate on long-term debt, rd Rate on line of credit, FLOC 2 3 11% 12% a. What are the forecasted levels of the line of credit and special dividends ? (Hints: Create a column showing the ratios for the current year, then create a new column showing the ratios used in the forecast. Also, create a preliminary forecast that doesn't include any new line of creditor special dividends. Identify the financing deficit or surplus in this preliminary forecast and then add a new column that shows the final forecast that includes any new line of credit or special dividend.) 5 5 7 8 9 0 1 2 23 34 35 36 37 38 39 40 Begin by calculating the appropriate historical ratios in Column E. Then put these ratios and any other input ratios in Column G. Forecast the preliminary balance sheets and income statements in Column H. Don't Inelude any tine of credit or special dividend in the preliminary forecast After completing the preliminary forecast of the balance sheets and income statement, go to the area below the preliminary forecast and identify the financing deficit or surplus, Then use Excel's IF statements to specify the amount of any new line of credit OR special dividend you should not have a new line of credit AND a special dividend, only one or the other) After specifying the amounts of the special dividend or line of credit, create a second column() for the final forecast next to the column for the preliminary forecast 1. In this final forecast, be sure to include the effect of the special dividend or line of credit Income Statements: December 31, in thousands of dollars) 2018 Historical ratios 2019 Preliminary 2019 Input forecast (doesn't include ratios special dividend or LOC) 2019 Final forecast Includes special dividend or LOC) Forecasting basis Growth % of sales of fixed assets Sales Expenses (excluding depr. & amort) Depreciation and Amortization EBIT Interest expense on long-term debt Interest expense on line of credit Taxes (40%) Net Income 2018 $455,150 $386,878 $14,565 $53,708 $11.880 50 $41,828 $16.731 $25,097 Interest rate x average debt during year $12,554 Common dividends (regular dividends) Special dividends Addition to retained earnings Growth Zaro in preliminary forecast $12,543 Balance Sheets December 31, in thousands of dollars) 2018 Historical ratios 2019 Preliminary 2019 Input forecast doesn't include ratios special dividend or LOC) 2018 Forecasting basis 2019 Final forecast includes special dividend or LOC Assets Cash Accounts Receivable Inventories Total current assets Fixed assets Total assets $18,206 $100,133 $45515 $163,854 $182,060 5345,914 of sales of sales of sales % of sales 531,161 327,309 50 of sales Sofsales Zaro in preliminary forecast Les and equity Accounts payable Acerul Line of credit Total current liabilis Long-term debe Total abilities Commons Retained Earings Total common equity Total abilities and equity Previous $120,000 5179,170 160.000 5106,745 $160.145 1345,014 Previous Previous - Addition to retained earning dentify Financing Deficit or Surplus increase in spontaneous liabilities (accounts payable and accrual - Increase in long-term bonde, preferred stock and common stock Net income in preliminary forecast minus regular common dividends increase in thancing - Increase in total assets Amount of financing deficit or surplus deficit in financing trgatvel show the amount for the line of credit Our in inancing positive show the amount of the special dividend 11 #2 What are the forestalevels of the line of credit and special dividende? 13 4 Required in ofert No copied as om 1999 H100) when sown in 31 25 Special dividende 56 37 Now that the growth in sales is an id by changing the growth in Cell 1) What are the forecasted levels of line of 38 and special dividende Now when i 30 Requiredine of credit 11 Social dividendo Start with the partial model in the file Choo P10 Bulld Model.xlsx on the textbook's Web site, which contains the 2018 financial statements of Zleber Corporation. Forecast Zeiber's 2019 income statement and balance sheets. Use the following assumptions: (1) Sales grow by 6%. 2) The ration of expenses to sales, depreciation to fixed assets, cash to sales, accounts receivable to sales, and inventories to sales will be the same in 2019 as in 2018. (3) Zeiber will not issue any new stock or new long-term bonds. (4) The Interest rate is 11% for long term debt and the interest expense on long-term debt is based on the average balance during the year. (5) No interest is earned on cash. (6) Regular dividends grow at an 3% rate (6) Calculate the additional funds needed (AFN). If new financing is required, assume it 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 will be made on the last day of the year, so there will be no additional interest expense for the new line of credit. If surplus funds are available, pay a special dividend. Key Input Data: Used in the forecast 40% 8% 9% Tax rate Dividend growth rate Rate on notes payable-term debt, rstid Rate on long-term debt, rd Rate on line of credit, FLOC 2 3 11% 12% a. What are the forecasted levels of the line of credit and special dividends ? (Hints: Create a column showing the ratios for the current year, then create a new column showing the ratios used in the forecast. Also, create a preliminary forecast that doesn't include any new line of creditor special dividends. Identify the financing deficit or surplus in this preliminary forecast and then add a new column that shows the final forecast that includes any new line of credit or special dividend.) 5 5 7 8 9 0 1 2 23 34 35 36 37 38 39 40 Begin by calculating the appropriate historical ratios in Column E. Then put these ratios and any other input ratios in Column G. Forecast the preliminary balance sheets and income statements in Column H. Don't Inelude any tine of credit or special dividend in the preliminary forecast After completing the preliminary forecast of the balance sheets and income statement, go to the area below the preliminary forecast and identify the financing deficit or surplus, Then use Excel's IF statements to specify the amount of any new line of credit OR special dividend you should not have a new line of credit AND a special dividend, only one or the other) After specifying the amounts of the special dividend or line of credit, create a second column() for the final forecast next to the column for the preliminary forecast 1. In this final forecast, be sure to include the effect of the special dividend or line of credit Income Statements: December 31, in thousands of dollars) 2018 Historical ratios 2019 Preliminary 2019 Input forecast (doesn't include ratios special dividend or LOC) 2019 Final forecast Includes special dividend or LOC) Forecasting basis Growth % of sales of fixed assets Sales Expenses (excluding depr. & amort) Depreciation and Amortization EBIT Interest expense on long-term debt Interest expense on line of credit Taxes (40%) Net Income 2018 $455,150 $386,878 $14,565 $53,708 $11.880 50 $41,828 $16.731 $25,097 Interest rate x average debt during year $12,554 Common dividends (regular dividends) Special dividends Addition to retained earnings Growth Zaro in preliminary forecast $12,543 Balance Sheets December 31, in thousands of dollars) 2018 Historical ratios 2019 Preliminary 2019 Input forecast doesn't include ratios special dividend or LOC) 2018 Forecasting basis 2019 Final forecast includes special dividend or LOC Assets Cash Accounts Receivable Inventories Total current assets Fixed assets Total assets $18,206 $100,133 $45515 $163,854 $182,060 5345,914 of sales of sales of sales % of sales 531,161 327,309 50 of sales Sofsales Zaro in preliminary forecast Les and equity Accounts payable Acerul Line of credit Total current liabilis Long-term debe Total abilities Commons Retained Earings Total common equity Total abilities and equity Previous $120,000 5179,170 160.000 5106,745 $160.145 1345,014 Previous Previous - Addition to retained earning dentify Financing Deficit or Surplus increase in spontaneous liabilities (accounts payable and accrual - Increase in long-term bonde, preferred stock and common stock Net income in preliminary forecast minus regular common dividends increase in thancing - Increase in total assets Amount of financing deficit or surplus deficit in financing trgatvel show the amount for the line of credit Our in inancing positive show the amount of the special dividend 11 #2 What are the forestalevels of the line of credit and special dividende? 13 4 Required in ofert No copied as om 1999 H100) when sown in 31 25 Special dividende 56 37 Now that the growth in sales is an id by changing the growth in Cell 1) What are the forecasted levels of line of 38 and special dividende Now when i 30 Requiredine of credit 11 Social dividendo
