FINANCIAL MODELLING THROUGH SPREADSHEETS MIDTERM 2018

Information is given for BLUESTAR COMPANY

1 The information on Financial statements is given only for 2008

2 The information on Financial Indicators are given for years 2005 - 2008
3 The Assumptions of factors are given in the "Assumptions" Sheet based on which
a) Project the Financial Statements for years from 2009 - 2012 for each line item given in the Sheet "P & L Account
b) Project the Cash Flow Statement for the years from 2009 - 2012 for each line item given in the Sheet " Cash Flow
c) Project the Financial Indicators from 2009 - 2012 for all the ratios given in the template "Financial Indicators"
d) Prepare Line Charts for Profitablity and Turnover Ratios and interpret the trend. Conduct Du Pont Analysis for all

Present them in neat form, with correct Captions, Professional formatting , style and fonts

Evaluation Criteria: for all Item Sets a to d

Understanding the Concepts

Building the Model
Interpretation
Charts
TERM 2018

MARKS

ven in the Sheet "P & L Account and Balance Sheet" 20

m given in the Sheet " Cash Flows" 20
mplate "Financial Indicators" 20
Conduct Du Pont Analysis for all projected years 40

Maximum Marks 100

Assumptions for Forecasting Model

BLUESTAR LIMITED
Income Statement
Sales
Cost of Sales
Selling, General & Admn. Expenses
Depreciation
Other Net (Income)/Expenses
Interest Income
Interest Expense

Income Taxes

Balance Sheet
Assets
Cash and Marketable Securities
Accounts Receivable
Inventories
Other Current Assets
Property, Plant and Equipment, Gross
Accumulated Depreciation
Property, Plant and Equipment, Net
Other Non-Current Assets

Liabilities and Shareholders' Equity

Accounts Payable
Short-Term Debt
Other Current Liabilities
Long-Term Debt
Deferred Income Taxes
Other Non-Current Liabilties
Paid-In Capital
Retained Earnings

Other Assumptions
Dividend payout ratio
Interest on short-term debt
Interest on long-term debt
Interest on cash & marketable securities
Number of shares outstanding
P/E ratio
Assumption

Will grow at 5%, based on input from management

50% of sales, specified by management
29% of sales, based on expected worsening
8% of Gross PP&E, based on analysis of depreciation schedules
-0.7% of sales, based on historical average
Calculate based on average balance and interest rate specified later
For STD calculate based on average balance and interest rate
For LTD interest expense will remain unchanged at $13.5 million
35% of pre-tax income

Minimum $0
8.4% of sales, based on historical average
8.8% of sales, based on historical average
7.6% of sales, based on historical average
Will grow at 8% per year, specified by management
Calculated from other items
Calculated from other items
Will grow at 8% per year, specified by management

6.1% of sales, same as historical average

Use to balance the balance sheet (plug), but cannot be negative
8.3% of sales, same as 2008
Will remain unchanged
1.4% of sales, based on historical average
7.6% of sales, based on historical average
Will remain unchanged
Calculated from other items

40%, based on discussion with management

7%, based on economic forecast
Rates embedded in existing debt, annual expense $13.5 million
6%, based on economic forecast
Will remain unchanged
Will decline to 16 in 2009 and then improve to 18, 20, and 22 in the following years
Income Statement and Balance Sheet for BLUESTAR Corp.

Income Statement ($ Million)

Historical period Forecast Period
### 2008 2009 2010
Sales ### $1,334.4 $1,401.1 $1,471.2
Cost of Sales ### $667.0 $700.6 $735.6
Gross Operating Income ### $667.4 $700.6 $735.6

Selling, General & Admn. Expenses ### $373.3 $406.3 $426.6

Depreciation ### $75.2 $78.9 $85.2
Other Net (Income)/Expenses ### ($8.2) ($9.81) ($10.30)
EBIT ### $227.1 $225.15 $234.04

Interest (Income) ### ($2.0) ($3.94) ($6.03)

Interest Expense ### $23.7 $21.90 $22.35
Pre-Tax Income ### $205.4 $207.2 $217.7

Income Taxes ### $72.6 $72.51 $76.20

Net Income ### $132.8 $134.7 $141.5

Dividends ### $40.1 $53.87 $56.61

Addition to Retained Earnings ### $92.7 $80.8 $84.9

Balance Sheet ($ Million)

Assets
Cash and Marketable Securities ### $28.4 $84.07 $88.27
Accounts Receivable ### $120.1 $117.7 $123.6
Inventories ### $116.8 $123.3 $129.5
Other Current Assets ### $97.5 $106.5 $111.8
Total Current Assets ### $362.8 $431.5 $453.1

Property, Plant and Equipment, Gross ### $913.1 $986.1 $1,065.0

Accumulated Depreciation ### $427.9 $506.8 $592.0
Property, Plant and Equipment, Net ### $485.2 $479.4 $473.0

Other Non-Current Assets ### $456.3 $492.8 $532.2

Total Non-Current Assets ### $941.5 $972.2 $1,005.3

Total Assets ### $1,304.3 $1,403.7 $1,458.4

Liabilities and Shareholders' Equity

Accounts Payable ### $80.5 $84.07 $88.27
Short-Term Debt ### $110.3 $105.6 $59.3
Other Current Liabilities ### $111.3 $112.09 $117.69
Total Current Liabilities ### $302.1 $301.8 $265.3

Long-Term Debt ### $218.1 $218.1 $218.1

Deferred Income Taxes ### $12.7 $19.62 $20.60
Other Non-Current Liabilities ### $94.5 $106.49 $111.81
 Total Liabilities ### $627.4 $646 $616

Paid-In Capital ### $44.8 $44.8 $44.8

Retained Earnings ### $632.1 $712.9 $797.8
Total Shareholders' Equity ### $676.9 $757.7 $842.6

Total Liabilities and Shareholders' Equity ### $1,304.3 $1,403.7 $1,458.4

Other Data
Stock Price (year-end) ### $51.40 $46.65 $55.15
Average Number of Shares Outstanding (millions)
### 46.2 46.2 46.2

Financial Indicators
Valuation Ratios
EPS ### $2.87 $2.92 $3.06
Dividend per Share ### $0.87 $1.17 $1.23
P/E Ratio ### 17.9 16.0 18.0
P/B (price to book) Ratio ### 3.5 2.8 3.0
Dividend Payout Ratio ### 30% 40% 40%

Profitability Ratios
Return on Equity (ROE) ### 21.2% 18.8% 17.7%
Return on Sales (ROS) ### 17.0% 16.1% 15.9%

Growth Rates
EPS Growth Rate ### 1.4% 1.4% 5.1%
Dividend Growth Rate ### 2.1% 34.3% 5.1%
Sales Growth Rate ### 2.6% 5.0% 5.0%
EBIT Growth Rate ### 3.7% -0.9% 3.9%
Net Income Growth Rate ### 0.1% 1.4% 5.1%

Liquidity Ratios
Current Ratio ### 1.20 1.43 1.71
Quick Ratio ### 0.49 0.67 0.80

Operating Efficiency Ratios

Inventory Turnover Ratio ### 5.7 5.7 5.7
Receivable Turnover Ratio ### 11.1 11.9 11.9

Leverage Ratios
Total Debt to Total Capitalization ### 32.7% 29.9% 24.8%
Long-Term Debt to Total Capitalization ### 21.7% 20.2% 19.5%
Total Debt to Equity ### 48.5% 39.9% 36.4%

Coverage Ratios
Times Interest Earned (TIE) ### 9.6 10.3 10.5
Cash Coverage Ratio ### 12.8 6.7 6.7
Forecast Period Forecasting
2011 2012 Factor
$1,544.7 $1,622.0 5.0%
$772.4 $811.0 50.0%
$772.4 $811.0

$448.0 $470.4 29.0%

$92.0 $99.4 8.0%
($10.81) ($11.35) -0.7%
$243.19 $252.59

($6.33) ($6.65) 7% STD

$22.79 $23.25
$226.7 $236.0

$79.36 $82.59
$147.4 $153.4

$58.95 $61.36
$88.4 $92.0

$92.68 $97.32 6.0%

$129.8 $136.2 8.4%
$135.9 $142.7 8.8%
$117.4 $123.3 7.6%
$475.8 $499.6

$1,150.2 $1,242.3 8.0%

$684.0 $783.4
$466.2 $458.9

$574.8 $620.8 8.0%

$1,041.0 $1,079.7

$1,516.8 $1,579.2

$92.68 $97.32
$12.4 $0.0
$123.58 $129.76
$228.7 $227.1

$218.1 $218.1 unchanged

$21.63 $22.71 1.4%
$117.40 $123.27 7.6%
 $586 $591

$44.8 $44.8
$886.2 $978.3
$931.0 $1,023.1

$1,516.8 $1,614.2

$63.81 $73.05
46.2 46.2

$3.19 $3.32
$1.28 $1.33
20.0 22.0
3.2 3.3
40% 40%

16.6% 15.7%
15.7% 15.6%

4.1% 4.1%
4.1% 4.1%
5.0% 5.0%
3.9% 3.9%
4.1% 4.1%

2.08 2.20
0.97 1.03

5.7 5.7
11.9 11.9

19.8% 17.6%
18.8% 17.6%
33.4% 30.8%

10.7 10.9
6.6 6.6
Statement of Cash Flows for BLUESTAR Corp.
Millions of Dollars

Historical Period Forecast Period

2008 2009 2010
Cash Flows from Operations
Net Income $132.8 $134.7 $141.5
Depreciation Expense $75.2 $78.9 $85.2
Decrease/(Increase) in Accounts Receivable ($12.8) $2.4 ($5.9)
Decrease/(Increase) in Inventories ($1.9) ($6.5) ($6.2)
Decrease/(Increase) in Other Current Assets $6.2 ($9.0) ($5.3)
Increase/(Decrease) in Accounts Payable $8.7 $3.6 $4.2
Increase/(Decrease) in Other Current Liabilities ($60.8) $0.8 $5.6
Increase/(Decrease) in Deferred Income Taxes ($2.3) $6.9 $1.0
Increase/(Decrease) in Other Non-Current Liabilities ($20.5) $12.0 $5.3
Total Cash Flows from Operations $124.6 $223.7 $225.5

Cash Flows from Investing

(Additions to) Property, Plant & Equipment ($92.3) ($73.0) ($78.9)
(invetsment) in Other Non-Current Assets ($49.3) ($36.5) ($39.4)
Total Cash Flows from Investing ($141.6) ($109.6) ($118.3)

Cash Flows from Financing

From Issuance/(Repayment) of Short-Term Debt $30.5 ($4.7) ($46.3)
From Issuance/(Repayment) of Long-Term Debt $16.3 $0.0 $0.0
From Sale/(Repurchase) of Equity $6.6 $0.0 $0.0
Cash Dividends Paid to Shareholders ($40.1) ($53.9) ($56.6)
Total Cash Flows from Financing $13.3 ($58.6) ($102.9)

Net Change in Cash & Marketable Securities ($3.7) $55.6 $4.2

Beginning Cash & Marketable Securities $32.1 $28.4 $84.1

Ending Cash & Marketable Securities $28.4 $84.1 $88.3
Net Change in Cash & Marketable Securities ($3.7) $55.7 $4.2
Forecast Period
2011 2012

$147.4 $153.4
$92.0 $99.4
($6.2) ($6.5)
($6.5) ($6.8)
($5.6) ($5.9)
$4.4 $4.6
$5.9 $6.2
$1.0 $1.1
$5.6 $5.9
$238.1 $251.4

($85.2) ($92.0)
($42.6) ($46.0)
($127.8) ($138.0)

($46.9) ($12.4)
$0.0 $0.0
$0.0 $0.0
($59.0) ($61.4)
($105.9) ($73.8)

$4.4 $39.6

$88.3 $92.7
$92.7 $97.3
$4.4 $4.6
Financial Indicators for BLUESTAR Cor 2005 2006 2007 2008
Valuation Ratios
EPS $2.26 $2.58 $2.83 $2.87
Dividend per Share $0.80 $0.82 $0.85 $0.87
P/E Ratio 24.5 25.3 19.6 17.9
P/B (price to book) Ratio 6.5 6.3 4.5 3.5
Dividend Payout Ratio 35% 32% 30% 30%

Profitability Ratios
Return on Equity (ROE) 27.0% 24.8% 21.2%
Return on Sales (ROS) 14.6% 16.0% 16.8% 17.0%

Growth Rates
EPS Growth Rate 13.7% 10.0% 1.4%
Dividend Growth Rate 2.6% 3.9% 2.1%
Sales Growth Rate 1.4% 3.9% 2.6%
EBIT Growth Rate 10.7% 9.7% 3.7%
Net Income Growth Rate 12.1% 8.9% 0.1%

Liquidity Ratios
Current Ratio 1.21 1.41 1.11 1.20
Quick Ratio 0.46 0.55 0.43 0.49

Operating Efficiency Ratios

Inventory Turnover Ratio 6.2 6.1 5.9 5.7
Receivable Turnover Ratio 12.4 12.2 12.1 11.1

Leverage Ratios
Total Debt to Total Capitalization 33.1% 26.2% 32.8% 32.7%
Long-Term Debt to Total Capitalization 26.7% 21.7% 23.5% 21.7%
Total Debt to Equity 49.4% 35.5% 48.8% 48.5%

Coverage Ratios
Times Interest Earned (TIE) 11.1 13.2 10.7 9.6
Cash Coverage Ratio 14.1 16.7 13.4 12.8
 2009 2010 2011 2012

$2.92 $3.06 $3.19 $3.32

$1.17 $1.23 $1.28 $1.33
16 18 20 22
2.8 3.0 3.2 3.3
40% 40% 40% 40%

19% 18% 17% 16%

16% 16% 16% 16%

0.0% 5.1% 4.1% 4.1%

34.3% 5.1% 4.1% 4.1%
5% 5% 5% 5%
-0.9% 3.9% 3.9% 3.9%
1.4% 5.1% 4.1% 4.1%

1.43 1.71 2.08 2.20

0.67 0.80 0.97 1.03

5.68 5.68 5.68 5.68

11.9 11.9 11.9 11.9

29.9% 24.8% 19.8% 17.6%

20.2% 19.5% 18.8% 17.6%
40% 36% 33% 31%

10.28 10.47 10.67 10.86

6.68 6.66 6.63 6.59