PLEASE READ THESE DIRECTIONS ALONG WITH THE COMMENTS (IN THE OTHER SHEETS)

CAREFULLY. Comments are indicated by a small red triangle in a cell.

MOST IMPORTANTLY, ENSURE THAT YOUR EXCEL PROGRAM IS SET TO APPROXIMATELY
50 ITERATIONS IN THE TOOLBAR: TOOLS/OPTIONS/CALCULATION; AND CHECK
THE ITERATION BOX.
1. This model uses the projected financial statement method to forecast 5 years of pro forma
financial statements. The Historical data should be the most recent data available
for your firm -- be sure to re-date the spreadsheet as needed.
An earlier version of this file was included with the 9th Ed. of the Brigham/Ehrhardt
text. Page or chapter references in this file are to the 10th Ed. of this text; but you may be
using the text: Corporate Finance, A Focused Approach, by Ehrhardt and Brigham.
This text has the same chapters (but in a different order). To find the references use either
the index or the Table of Contents.
Other more advanced versions of this spreadsheet are available either on the CD-ROM that
may accompany your text; or on the textbook's website (please see your syllabus).
2. The first step is to complete the relevant information on the Key Input & Output sheet.
The second step is to review the completed AFN and Pro Formas sheet to ensure that all of
the formulas were calculated properly.
The third step is to complete the FCF Analysis -- by filling in the appropriate formulas to calculate
Free Cash Flow. Remember that FCF is discussed in the text (and in most "Valuation" handbooks).
Remaining steps are left up to the group or individual performing the analysis, and are discussed
in additional detail in the Project Guidelines.
3. The model uses a full financing feedback procedure. An initial
income statement and balance sheet is forecasted for each year,
and then the designated financing mix is applied to the additional
funds needed (AFN). The financing impact feeds into the
final income statement and balance sheet, and, since the process is
circular, CIRC appears at the bottom of the screen.
4. Because of the circularity, the F9 (CALC) key must be pressed
once each time input data is changed. To be sure that the
calculations are complete, continue to press the CALC key until
the Cumulative AFN key output stabilizes.
5. A detailed ratio analysis is also provided.
6. By selecting the graph tab at the lower left of your worksheet,
you may view a graph which shows how the debt-to-assets ratio changes
over time at different growth rates. Please see the Comment about using the graph.

7. Keep in mind that this workbook uses the (constant) PERCENT OF SALES method for
constructing the Pro Formas. There are MANY ways in which this method can be adjusted, and
you may want to consider some of those approaches. The text, along with the CD-ROM that

comes with the Brigham/Ehrhardt text discuss and illustrate these methods in more detail.
8. Remember that this is a learning process, and with relatively complex spreadsheets, much of
the learning is by trial and error. In most cases, there is no one "perfect" solution.
If you have suggestions for making this workbook better, please let me know.

INPUT DATA:
Forecasted sales growth:
2002
2003
2004
2005
2006
AFN financing percentages:
Notes payable
Long-term bonds
Common stock
Debt costs:
Notes payable
Long-term bonds
Tax rate
WACC
Dividend payout ratio

INPUT DATA
Long-Term Growth (gn) =
Long-Term WACC =

KEY OUTPUT:
15.0%
15.0%
15.0%
15.0%
15.0%
50.0%
50.0%
0.0%
12.0%
12.0%
40.0%
11.0%
20.0%

3.00%
10.00%

1999 AFN
2000 AFN
2001 AFN
2002 AFN
2003 AFN
Cumulative AFN

$6.1
$7.2
$8.6
$10.1
$11.9
$43.9
Ratios:

2002

Cur
2.5
PM
5.0%
TATO
1.1
ROA
5.6%
Debt
34.7%
ROE
8.6%
Intrinsic Price/Share =

2003

2004

2.1
4.7%
1.1
5.3%
39.0%
8.6%

1.9
4.5%
1.1
5.0%
43.0%
8.7%
$ 10.37

2005

2006

2007

1.7
4.2%
1.1
4.7%
46.7%
8.8%

1.6
4.0%
1.1
4.5%
50.0%
8.9%

1.5
3.8%
1.1
4.2%
53.2%
9.1%

PROJECTED INCOME STATEMENTS ($M)

Initial
2003
Sales
$92.0
Operating costs
82.0
EBIT
$10.0
Less interest
2.0
Earnings before taxes
$8.0
Taxes
3.2
NI avail to common
$4.8
Dividends to common
$1.0
Additions to ret earn
$3.8

Final
2003
$92.0
82.0
$10.0
2.7
$7.3
2.9
$4.4
$0.9
$3.5

Initial
2004
$105.8
94.3
$11.5
2.7
$8.8
3.5
$5.3
$1.1
$4.2

Final
2004
$105.8
94.3
$11.5
3.6
$7.9
3.2
$4.7
$0.9
$3.8

PROJECTED
Initial
2005
$121.7
108.4
$13.2
3.6
$9.6
3.9
$5.8
$1.2
$4.6

Final
2003

Initial
2004

Final
2004

PROJECTED
Initial
2005

PROJECTED BALANCE SHEETS

Initial
2003
Cash
Other ST Assets
Other ST Assets
Accounts receivable
Inventories
Tot current assets
Other LT Asset
Net plant and equip
Total assets

$
$
$
$
$
$
$
$
$

4.6
13.8
18.4
36.8
46.0
82.8

$
$
$
$
$
$
$
$
$

4.6
13.8
18.4
36.8
46.0
82.8

$
$
$
$
$
$
$
$
$

5.3
15.9
21.2
42.3
52.9
95.2

$
$
$
$
$
$
$
$
$

5.3
15.9
21.2
42.3
52.9
95.2

$
$
$
$
$
$
$
$
$

6.1
18.3
24.3
48.7
60.8
109.5

Accounts payable
Other ST Liabilities
Notes payable
Accruals
Total current liab
Other LT Liabilities
Long-term bonds
Total debt
Common stock
Retained earnings
Total common equity
Total liabs & equity

$
$
$
$
$
$
$
$
$
$
$
$

9.2
5.0
14.2
12.0
26.2
20.0
30.8
50.8
77.0

$
$
$
$
$
$
$
$
$
$
$
$

9.2
8.1
17.3
15.1
32.3
20.0
30.5
50.5
82.8

$
$
$
$
$
$
$
$
$
$
$
$

10.6
8.1
18.6
15.1
33.7
20.0
34.7
54.7
88.4

$
$
$
$
$
$
$
$
$
$
$
$

10.6
11.7
22.3
18.7
40.9
20.0
34.3
54.3
95.2

$
$
$
$
$
$
$
$
$
$
$
$

12.2
11.7
23.8
18.7
42.5
20.0
38.9
58.9
101.4

$
$
$
$
$

Initial
2003
5.8
2.9
2.9
5.8

$
$
$
$
$

Final
2003
6.1
3.1
3.1
6.1

$
$
$
$
$

Initial
2004
6.8
3.4
3.4
6.8

$
$
$
$
$

Final
2004
7.2
3.6
3.6
7.2

$
$
$
$
$

Initial
2005
8.1
4.0
4.0
8.1

Add Funds Needed(AFN)

Add notes payable
Add long-term bonds
Add common stock ($)
Total new securities

TheDrydenPressitemsandderiveditemscopyright 1999byTheDrydenPress

ROJECTED
Final
2005
$121.7
108.4
$13.2
4.6
$8.6
3.4
$5.2
$1.0
$4.1

Initial
2006
$139.9
124.7
$15.2
4.6
$10.6
4.2
$6.4
$1.3
$5.1

Final
2006
$139.9
124.7
$15.2
5.8
$9.4
3.7
$5.6
$1.1
$4.5

Initial
2007
$160.9
143.4
$17.5
5.8
$11.7
4.7
$7.0
$1.4
$5.6

Final
2007
$160.9
143.4
$17.5
7.3
$10.2
4.1
$6.1
$1.2
$4.9

Final
2005

Initial
2006

Final
2006

Initial
2007

Final
2007

ROJECTED

$
$
$
$
$
$
$
$
$

6.1
18.3
24.3
48.7
60.8
109.5

$
$
$
$
$
$
$
$
$

7.0
21.0
28.0
56.0
70.0
125.9

$
$
$
$
$
$
$
$
$

7.0
21.0
28.0
56.0
70.0
125.9

$
$
$
$
$
$
$
$
$

8.0
24.1
32.2
64.4
80.5
144.8

$
$
$
$
$
$
$
$
$

8.0
24.1
32.2
64.4
80.5
144.8

$
$
$
$
$
$
$
$
$
$
$
$

12.2
16.0
28.1
23.0
51.1
20.0
38.4
58.4
109.5

$
$
$
$
$
$
$
$
$
$
$
$

14.0
16.0
30.0
23.0
52.9
20.0
43.5
63.5
116.4

$
$
$
$
$
$
$
$
$
$
$
$

14.0
21.0
35.0
28.0
63.0
20.0
42.9
62.9
125.9

$
$
$
$
$
$
$
$
$
$
$
$

16.1
21.0
37.1
28.0
65.1
20.0
48.5
68.5
133.6

$
$
$
$
$
$
$
$
$
$
$
$

16.1
27.0
43.0
34.0
77.0
20.0
47.8
67.8
144.8

$
$
$
$
$

Final
2005
8.6
4.3
4.3
8.6

$
$
$
$
$

Initial
2006
9.5
4.8
4.8
9.5

$
$
$
$
$

Final
2006
10.1
5.1
5.1
10.1

$
$
$
$
$

Initial
2007
11.2
5.6
5.6
11.2

$
$
$
$
$

Final
2007
11.9
5.9
5.9
11.9

TheDrydenPressitemsandderiveditemscopyright 1999byTheDrydenPress

Timeline
Year
EBIT
Tax Rate
NOPAT
NOWC
Net Fixed Assets
Net Invest in OP Capital
Long-Term Growth
Initial FCFs
Continuing Value
Total FCFs
PV of FCFs
Total PF of FCFs
+ Mkt Securities
Total Firm Value
- Bk Value of Debt
Value of Equity
# Shrs Outstanding
Price/Share =

ACTUAL
PROJECTED
0
1
2
3
4
5
2002
2003
2004
2005
2006
2007
$
8.70 $ 10.01 $ 11.51 $ 13.23 $ 15.22 $ 17.50
40%
40%
40%
40%
40%
40%
$
5.22 $
6.00 $
6.90 $
7.94 $
9.13 $ 10.50

$
$
$
$
$
$

120.74
120.74
17.00
104
10
10.37

6.00

6.90

7.94

9.13

$
$

6.00
5.41

$
$

6.90
5.60

$
$

7.94
5.80

$
$

9.13
6.01

$ 10.50
$ 154.49
$ 164.99
$ 97.91

Ensure that you have the correct values for your

company in the appropriate cells.

This value is also repeated on the Key Input & Output Sheet

Please see the Text, Chapter 2 for details on calculating FCF.

You may use alternate formulas.

Continuing Value of
Firm
6
2008

Enter the appropriate

formulas in the cells
highlighed in bright yellow
$

values for your

Key Input & Output Sheet

3.00%
10.81

Debt-to-Assets Ratio
at Different Growth Rates
70.0%

60.0%

50.0%

40.0%

30.0%

20.0%

10.0%

0.0%
2002

2003

2004
10% Growth

2005
15% Growth

2006

2007

20% Growth

TheDrydenPressitemsandderiveditemscopyright 1999byTheDrydenPress