A0* = Assets at 1998. All assets were needed for 1998 sales
S0 = 1998 Sales
1998 Net Income
1998 Dividends
L0* = 1998 payables + accruals, which increase spontaneously with sales
Part II. Data Used in the AFN Equation: 1998 Ratios Held Constant
AFN = Additional Funds Needed to buy assets needed to support growth. AFN is in
addition to funds raised internally, i.e., AFN represents required external funds.
g = Target growth rate in sales.
(A0*/S0)S
0.6667($300)
$281
AFN =
AFN =
$200 million
Spontaneous
increase in
Payables and
Accruals
(L0*/S0)S
0.0667($300)
$28
1998
$1,875
$4,800
$95.0
$0.0
$47
0.6667
$5,222
$422
0.0667
0.0198
0.5106
Part I. Inputs
Growth rate, g
Operating costs / Sales
Receivables/Sales
Inventories/Sales
Debt ratio
Payout ratio
Adjustable Inputs:
1997
1998
NA
10%
90.54%
90.54%
12.50%
12.50%
20.50%
20.50%
53.0%
53.0%
48.94%
48.94%
1998
Industry
Fixed Inputs:
NA
Tax rate (T)
40%
87.00%
Interest rate
10.00%
9.86% Shares out'ing
50
9.17% Price per share
$23.06
40.0%
FA/Sales
7.60%
45.0%
1997(exhibit 3)
$4,412,191.0
171,187.0
$4,241,004.0
56,259.0
$4,184,745.0
18,036.0
$4,166,709.0
$0.0
$4,166,709.0
2008
$51,248.0
$623,362.0
$826,228.0
$365,180.0
$1,866,018.0
Change
(1+ g)
0.905
See notes
EBT(T)
NI(Payout)
Change
(1+ g)
0.1250
0.2050
(1+ g)
1998(exhibit 4)
$4,800,000.0
$1,344,000.0
$3,456,000.0
74,000.0
$3,382,000.0
61,000.0
$3,321,000.0
$0.0
$3,321,000.0
1998
$50,000.0
$620,000.0
$826,000.0
$365,000.0
$1,861,000.0
$394,457.0
(1+ g)
$0.0
See notes
$394,457.0
$176,522.0
See notes
$570,979.0
$103,250.0
See notes
$892,396.0 $3,321,000.0
$995,646.0
$1,566,625.0
$544,000.0
$0.0
$544,000.0
$189,000.0
$733,000.0
$401,000.0
$4,213,396.0
$4,614,396.0
$5,347,396.0
1997
3.88%
14.13%
18.73%
30.60%
0.00%
2.36
1.87
75.38
94.44%
223.29%
418.49%
Profit
Margin
(NI/S)
1998E
28.00%
12.92%
17.21%
39.39%
0.00%
2.58
0.40
46.70
69.19%
178.45%
71.97%
Total Assets
Turnover
(S/A)
Equity
Multiplier
(Assets/
Equity)
1.87
0.40
1.67
$256.21
Actual 1997
94.44%
2.36
Forecasted for 1998
69.19%
2.58
Industry average data
5.00%
1.80
Earnings per share (EPS)
$83,334.18
Part V. Notes on Calculations
Assets in 1998 will change to this amount, from the balance sheet
Target debt ratio
Resulting total debt: (Target ratio)( 1998 Assets)
Less: Payables and accruals
Bank loans and bonds (= Interest-bearing debt)
Allocated to bank loans, based on 1997 proportions
Allocated to bonds, based on 1997 proportions
Interest expense: (Interest rate)(1998 bank loans plus bonds)
Target equity ratio = 1 Target debt ratio
Required total equity: (1998 Assets)(Target equity ratio)
Retained earnings, from 1998 balance sheet
Required common stock = Required equity Retained earnings
Old shares outstanding (millions)
Increase in common equity = 1998 Equity 1997 Equity
Initial price per share from input section
Change in shares = Change in equity/Initial price per share
New shares outstanding = Old shares + Shares
Old EPS = 1997 Net income / Old shares outstanding
New EPS = 1998 Net income / New shares outstanding
Industry
87.00%
9.86%
9.17%
40.00%
45.00%
1.80
1.67
6.00
5.00%
9.00%
15.00%
= ROE
418.5%
72.0%
15.0%
0.00%
100.00%
$1,861,000.0
53%
$986,330.0
-$544,000.0
$442,330.0
$0.0
$442,330.0
$44,233.0
47%
$874,670.0
$4,213,396.0
-$3,338,726.0
50
$297,750.0
$23.06
12,911.97
12,961.97
$83,334.18
$256.21