This group assignment is due on Tuesday, February $21$ at $10$:$45$AM$.$

Your group will conduct financial planning for your assigned firm for the next five years. You

will base the plan on the most recent fiscal$-$year$-$end data available on Compustat. For most of

the firms this semester this is $2022,$ but for a few the last available fiscal year is $2023.$

You have already collected the most recent five years of data for your firm, and created

condensed versions of the income statements and balance sheets, which are a better format for

the planning. You have also computed percent$-$of$-$sales figures for the accounts, which are

central for making reasonable assumptions for the planning. You have also conducted a study of

growth in sales over the past decade.

After analyzing the historic data, you can start planning for the next five years. Base your

forecasts upon some reasonable sales growth projection. This may be the historical rate over the

last few years, or perhaps the managers provide insights into their future growth expectations in

the $10-$K$.$ You may also get ideas from other sources, such as Value Line or other analysts.

Many of the accounts will obviously vary with sales, but others may not. In standard planning

methodology costs, and assets are assumed to vary as a percent$-$of$-$sales. In particular, the

$$small$$ accounts on the income statement, such as non$-$operating expenses, special items,

minority interest, and discontinued operations, need some careful consideration. If any of these

are trivial, they can be deleted. If they are more substantial and persistent, you must determine

how best to handle them: percent$-$of$-$sales, historic averages, most recent fiscal year, etc....

Usually, most liability accounts and interest expenses are frozen at their current levels. Also,

assume that the firm will maintain its current dividend policy.

Be sure to dedicate an area on your spread sheet for your assumptions. As we have seen, this will

be very useful for conducting sensitivity analyses.

In designing your study, be sure to note what happens to firm profitability, best represented as

EPS, and external financing needs or excess funds generated over the five$-$year planning period.

Prepare a succinct memorandum to the Corporate CFO $($you will find their name$)$ describing the

results of your financial planning for your assigned firm. The most important issues to stress are

what will happen to firm profitability $($EPS$),$ and the external financing required or excess cash

generated. Also, briefly summarize your central assumptions Think about what information is

essential to include in the memo. You should also consider the assumptions that are most

important or that were difficult to decide upon. Discuss at least three of these sensitivity

analyses. Clearly, the CFO is a very sophisticated reader. What is the absolutely essential

information he or she would want to know, to establish confidence in your estimate?

The memorandum should be in proper business form. It should not be longer than two single$-$

spaced pages $($though you should submit a double$-$spaced version for ease with editorial

commentary$).$ You will, of course, provide appendices containing the Excel programming of the

base financial planning $($and perhaps some work on the sensitivity analyses$)..$

You will hand$-$in one copy of the assignment at the beginning of class. The files must look

acceptable to present to corporate executives. Be sure to include titles for each spreadsheet,

which should include the firm, and the names of the group members who have worked on the

project. The pages should look reasonable, and breaks should be in sensible places. Also, post

your Excel files to the Drop$-$Box in Canvas. The cells in the excel files should be live where you

have made computations. Be sure that the title of your file contains some reference to the firm

and the number of the homework assignment $($for instance, WMT$-$FINC$423-02-$GHW$-2).$