Question 1

Start with the partial model in the file Ch12 P10 Build
a Model.xls on the textbook’s Web site, which
contains the 2013 financial statements of Zieber
Corporation. Forecast Zeiber's 2014 income
statement and balance sheets. Use the following
assumptions: (1) Sales grow by 5%. (2) The ratios of
expenses to sales, depreciation to fixed assets, cash
to sales, accounts receivable to sales, and
inventories to sales will be the same in 2014 as in
2013. (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) Dividends grow at
an 7% rate. (6) Calculate the additional funds needed
(AFN) by preparing forecaseted statements.
Quiz 1
FM lab B
01.03.2018

%age growth
sale 5%
i 11%
dividends 7%
Key Input Data:

Tax rate
Dividend growth rate
Rate on notes payable-term debt, rstd
Rate on long-term debt, rd
Rate on line of credit, rLOC

2013 ratios 2014

Sales $455,150 $477,907.50
Expenses (excluding depr. & amort.) $386,878 0.85 $406,221.38
Depreciation and Amortization $14,565 0.08 $14,564.80
EBIT $53,708 $57,121.33
Interest expense on long-term debt $11,880 $13,200
Interest expense on line of credit $0 0
EBT $41,828 $43,921.33
Taxes (40%) $16,731 $17,568.53
Net Income $25,097 $26,352.80
Common dividends (regular dividends) $12,554 $13,432.78
Special dividends 7685.79
Addition to retained earnings (DRE) $12,543 $5,234.23

December 31 Balance Sheets

(in thousands of dollars)

2013 ratios 2014

Assets:
Cash $18,206 0.04 $19,116.30
Accounts Receivable $100,133 0.22 $105,139.65
Inventories $45,515 0.1 $47,790.75
Total current assets $163,854 $172,046.70
Fixed assets $182,060 $182,060.00
Total assets $345,914 $354,106.70

Liabilities and equity

Accounts payable $31,861 0.07 $33,453.53
Accruals $27,309 0.06 $28,674.45
Line of credit $0
Total current liabilities $59,170 $62,127.98
Long-term debt $120,000 $120,000
Total liabilities $179,170 $182,127.98
Common stock $60,000 $60,000
Retained Earnings $106,745 $111,979
Total common equity $166,745 $171,979
Total liabilities and equity $345,914 $354,106.70

AFN calculation 7685.79 $0.00

Question 2
Calculate the present value of following cash flow stream.
1 2 3 4 5 6 7
Cash flows 125 120 140 150 130 140 200
i 5%
n 10
PV $820.70

Question 3
In case of forecsasting what decision a company should decide on, if the increase in spontaneous liabilities is mor
Answer: If the increase in spontaneous liabilities is more than spontaneous asset this means that the compa
pontaneous liabilities is more than the increase in spontaneous assets Justify?
this means that the company should issue special dividends.