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    Financial Forecast, AFN

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    ayesha akhtar
    Zieber Corporation's 2014 income statement and balance sheets were forecasted based on assumptions about 2013 ratios and growth rates. The forecast showed: 1) Sales growing 6% to $48.2 million and net income growing 8% to $26.2 million. 2) Additional financing needs (AFN) of -$4,525, indicating surplus funds. 3) No notes payable but a $0 special dividend since funds were in surplus.

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    Financial Forecast, AFN

    Uploaded by

    ayesha akhtar
    82 views3 pages
    Zieber Corporation's 2014 income statement and balance sheets were forecasted based on assumptions about 2013 ratios and growth rates. The forecast showed: 1) Sales growing 6% to $48.2 million and net income growing 8% to $26.2 million. 2) Additional financing needs (AFN) of -$4,525, indicating surplus funds. 3) No notes payable but a $0 special dividend since funds were in surplus.

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    Financial forecast, AFN

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    Zieber Corporation's 2014 income statement and balance sheets were forecasted based on assumptions about 2013 ratios and growth rates. The forecast showed: 1) Sales growing 6% to $48.2 million and net income growing 8% to $26.2 million. 2) Additional financing needs (AFN) of -$4,525, indicating surplus funds. 3) No notes payable but a $0 special dividend since funds were in surplus.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    82 views3 pages

    Financial Forecast, AFN

    Uploaded by

    ayesha akhtar
    Zieber Corporation's 2014 income statement and balance sheets were forecasted based on assumptions about 2013 ratios and growth rates. The forecast showed: 1) Sales growing 6% to $48.2 million and net income growing 8% to $26.2 million. 2) Additional financing needs (AFN) of -$4,525, indicating surplus funds. 3) No notes payable but a $0 special dividend since funds were in surplus.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 3

    Solution

    Chapter: 12
    Problem: 10

    Start with the partial model in the file Ch12 P10 Build a Model.xls on the textbook’s Web site, which contains the 2013 finan
    statements of Zieber Corporation. Forecast Zeiber's 2014 income statement and balance sheets. Use the following assump
    (1) Sales grow by 6%. (2) The ratios of expenses to sales, depreciation to fixed assets, cash to sales, accounts receivable t
    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 8% rate. (6) Calculate the additional fun
    needed (AFN). If new financing is required, assume it will be raised by drawing on a line of credit with an interest rate of 12
    Assume that any draw on the line of credit will be made on the last day of the year, so there will be no additional interest
    expense for the new line of credit. If surplus funds are available, pay a special dividend.

    a. What are the forecasted levels of notes payable and special dividends?

    Key Input Data: Used in the INPUT


    forecast g 6%
    interest rate 11%
    dividend growth rate 8%
    line of credit 12%

    December 31 Income Statements:


    (in thousands of dollars)
    Forecasting 2013 2014
    2013 basis Ratios Inputs
    Sales $455,150 6%
    Expenses (excluding depr. & amort.) $386,878 0.85 85%
    Depreciation and Amortization $14,565 $0.08 8%
    EBIT $53,708
    Interest expense on long-term debt $11,880
    Interest expense on line of credit $0
    EBT $41,828
    Taxes (40%) $16,731
    Net Income $25,097
    Common dividends (regular dividends) $12,554
    Special dividends
    Addition to retained earnings (DRE) $12,543

    December 31 Balance Sheets


    (in thousands of dollars)
    Forecasting 2013 2014
    2013 basis Ratios Inputs Without adj.
    Assets:
    Cash $18,206 4% $19,298.36
    Accounts Receivable $100,133 22% $106,141
    Inventories $45,515 10% $48,246
    Total current assets $163,854 $173,685
    Fixed assets $182,060 40% $192,984
    Total assets $345,914 $366,669

    Liabilities and equity


    Accounts payable $31,861 7% $33,772
    Accruals $27,309 6% $28,948
    Line of credit $0 $0
    Total current liabilities $59,170 $62,720
    Long-term debt $120,000 $120,000
    Total liabilities $179,170 $182,720
    Common stock $60,000 $60,000
    Retained Earnings $106,745 $119,424
    Total common equity $166,745 $179,424
    Total liabilities and equity $345,914 $362,144

    AFN -$4,525
    Increase in spontaneous liabilities (accounts payable and accruals)
    + Increase in long-term bonds, preferred stock and common stock
    + Net income minus regular common dividends
    Increase in financing
    − Increase in total assets
    Amount of deficit or surplus financing:
    If deficit in financing (negative), draw on line of credit
    If surplus in financing (positive), pay special dividend
    tains the 2013 financial
    e following assumptions:
    counts receivable to
    ck or new long-term
    ed on the average
    te the additional funds
    n interest rate of 12%.
    dditional interest

    old(1+g)
    2014
    Forecast
    482459
    410090.15
    $15,438.69
    $56,930.16
    $13,200
    $0
    $43,730.16
    $17,492.06
    $26,238.10
    13558.32
    $0
    $12,679.78

    2014
    Adj.

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