You're an ace analyst for a private US firm in the Processed & Packaged Goods industry. You've gathered this financial data (in $M):

Assets:

Current Assets:

Cash and Cash Equivalents 660

Accounts Receivable 442

Inventories 3924

Long-Term Assets:

Plant, Property, and Equipment 1200

Less: Accumulated Depreciation -228

Total Assets 5998

Liabilities

Current Liabilities

Notes Payable 600

Bonds Payable 150

Long-term Liabilites

Long-term Debt, Excluding current portion 1200

Equity

Common Stock 182

Retained Earnings 3866

Sales 2640

COGS 1056

SG&A (incl. marketing) 211

Interest Expense 156

EBT 1217

Income Taxes 426

Net Income 791

Shares Outstanding: 990 million

Supplemental: Due to favorable market conditions, the firm recently (following the publication of the financial results, and thus unreflected above) issued 120 million dollars of debt, and has very near-term plans to buy back 60 million in equity as market conditions permit.

a. Identify 5 comparable, PUBLIC firms in the industry. Create a table of most recent common-sized income statements and common-sized balance sheets. In which sector is your industry? If there are not enough US firms within your industry, you need to broaden your search to the sector. Table needs account names in the 1st column, your private firm's common sized statements in the 2nd, and your public firm comparable common sized statements in the 3rd-7th. The 8th columm contains an average of your comps (averaging detailed in part b). Explain why the firms are good comps using ratio analysis (can combine with work from part B).

b. Develop and justify a "weighting scheme" to calculate averages of financial figures from your public firms, to provide a relevant average for your firm. One approach is to give more weight to firms closer to your private firm in size or primary business activity. If you have 2 firms roughly the same size as yours, and 3 firms considerably different from your firm, a weighting scheme could reasonably be 35%, 35%, 10%, 10%, 10% (35% for each similar firm, 10% for the rest). Use the DuPont decomposition of ROE and other ratios you've learned from class to motivate your choices of weights and to demonstrate an understanding of what drives the industry. Use your best judgement, thoroughly explain your decisions, make sure the weights sum to 100%. Use these averages into the 8th column in the table in Part A.

r. Use reasonable assumptions to create your own growth and expansion plan. Of paramount importance is the sales growth rate, so go into detail here. Consider all relevant costs. The project must relate to your industry. All assumptions must be explained. Create pro-forma financial statements representing the firm after the expansion. For example, you could analyze the expenses and revenues (in new long-term assets for productive capacity, labor, materials, marketing, etc.) to grow your firm's revenue. Present a cash flow timeline, NPV, IRR, and Discounted Payback, along with the WACC if it changes from capital structure adjustments or from a change to the firm's risk level. Make your strongest sales pitch here.