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Tutorial 07

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39 views3 pages

Tutorial 07

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yalom85292
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Department of Finance

FIN 4348: Financial Modeling and Forecasting (2024)


Tutorial 07

Question 01
The following sheet contains data concerning Donna Company’s Statement of Financial
Position and Statement of Comprehensive Income.
Statement of Comprehensive Income
Year 2022 2023 2024 2025 2026 2027
Actual Actual Forecast Forecast Forecast Forecast
Sales 45,000 47,250 55,755 65,791 81,581 106,055
Cost of goods sold
(COGS) (33,000) (33,660) (38,372) (43,745) (52,493) (64,567)
Gross Profit 12,000 13,590 17,383 22,046 29,087 41,488
Depreciation (7,350) (8,039) (8,453) (9,229) (10,337) (11,408)
Interest on cash 428 449 530 625 775 1,008
EBIT 5,078 5,999 9,459 13,443 19,525 31,087
Interest payments on debt (2,400) (2,320) (2,240) (2,160) (2,080) (2,000)
Profit before tax 2,678 3,679 7,219 11,283 17,445 29,087
Tax (28%) (750) (1,030) (2,021) (3,159) (4,885) (8,144)
Profit after tax 1,928 2,649 5,198 8,124 12,560 20,943
Dividend (96) (265) (1,559) (3,656) (5,652) (10,471)
Retained earnings 1,831 2,384 3,638 4,468 6,908 10,471

Earnings per share 0.24 0.33 0.65 0.96 1.32 2.09


Market price per share 10.50 11.65 17.99 19.87 27.66 41.67
Share outstanding 8,000 8,000 8,000 9,000 10,000 10,000

Statement of Financial Position


2022 2023 2024 2025 2026 2027
Actual Actual Forecast Forecast Forecast Forecast
Assets
Fixed assets
At cost 147,000 160,789 169,062 184,572 206,746 228,168
Accumulated
depreciation (44,000) (52,039) (60,493) (69,721) (80,058) (91,467)
Net Fixed assets 103,000 108,750 108,569 114,851 126,688 136,701

Current assets
Inventory 3,960 4,039 4,605 5,249 4,199 5,165
Trade receivable 18,000 16,538 19,514 20,490 21,514 22,590
Other current assets 1,537 1,440 1,688 1,802 1,800 1,943
23,497 22,017 25,807 27,541 27,514 29,698
Cash 8,550 8,978 5,125 22,500 20,500.34 20,150
Total assets 135,047 139,745 139,502 164,892 174,702 186,550

Liabilities and Equity


Equity
Equity 80,000 80,000 80,000 90,000 100,000 100,000
Accumulated retained
earnings 6,527 8,911 12,550 17,018 23,926 34,397
Shareholder's equity 86,527 88,911 92,550 107,018 123,926 134,397
Debt 30,000 29,000 28,000 27,000 26,000 25,000
Current liabilities 18,520 21,833 18,952 30,874 24,776 27,153
Total liabilities and
equity 135,047 139,744 139,502 164,892 174,702 186,550

Required:
Calculate historical and forecasted financial ratios in the following categories for Donna Company
Profitability
 Return on Sales ratio (ROS)
 Return on Assets ratio (ROA)
 Return on Equity ratio (ROE)

Asset Turnover
 Receivables Turnover ratio
 Inventory Turnover ratio
 Asset Turnover ratio

Financial Leverage
 Debt ratio
 Times Interest Earned ratio

Liquidity
 Current ratio
 Quick ratio

Market Value
 Price To Earnings ratio
 Market To Book ratio
Question 02

General Electric Capital Corporation has issued 5.875% notes on 18/08/2013 at $27 each and
notes are due on 18/2/2043. The notes are issued in $25 denominations, and are redeemable at
the issuer’s option on or after 20/2/2018 at $25 per share plus accrued and unpaid interest.
Distributions of 5.875% ($ 1.46875) per annum are paid quarterly.
Units are expected to trade flat, which means accrued interest will be reflected in the trading
price and the purchasers will not pay and the sellers will not receive any accrued and unpaid
interest. The notes are senior obligations of the company and will rank equally with all existing
and future unsecured and unsubordinated indebtedness of the company.
i) Calculate Yield to Maturity of the notes
ii) Calculate the Yield to first call

Question 03
The example below calculates the NPV and IRR for an investment.
i) Create a one-dimensional data table showing the sensitivity of the NPV and IRR to
the year 1 cash flow (currently Rs. 10,000). Use a range of Rs. 9,000 – Rs. 12,000
in increments of Rs. 500.
ii) Create a two-dimensional data table showing the sensitivity of NPV to the year 1
cash flow and to the discount rate. Use the same range for the cash flows as in part
(i) above and use discount rates from 8% to 20%, with increments of 2%.

Yr 1 CF 10,000

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