Executive Summary and Introduction In May 2001, portfolio manager Kimi Ford was considering whether Nike, Inc. would be a good investment option. With an emphasis on value investing, Ford estimated that Nike was undervalued at discount rates below 11.17%. Her assistant Joanna Cohen’s did further calculations and estimated that Nike’s cost of capital was 8.4%. Ford manages a well-diversified portfolio and she has the focus on value investing. Therefore, we assume she would be interested in quality stocks with are fairly priced.
The schedule of cost of goods sold shows the cost of goods manufactured will positively affect the number cost of goods sold, reducing $40,000 labor cost eventually save $40,000 of cost of goods sold. In the income statement, we found net income is significantly affected by product sales and cost. When sales and other expenses stay the same as and cost of goods sold are reduced $40,000, net income increases from $30,750 to $55,490. In addition, we can also estimate the future expected net income for a company by calculating current actual income and probability of sales revenue increase or decrease percentage. Higher probability with a positive percentage of sales revenue will result a higher expected
This, in turn, leaves us with a high offer premium of 62.723 million euro’s. The market estimates the future synergy benefits at a vast amount of 110.398 million euro’s. This low October 21 share price, we assume in case the merger fails,
Forecasting Financial Statements of Apple Inc. Natalia Andruszkiewicz International American University FIN 500: Financial Management Abstract In this paper will show the Forecasting Financial Statements of Apple Inc. we will be able to see why Forecasting Financial Statements are important for the company and investors. Key words: financial statement, forecasting statement, Apple Inc., investors. The use of historic data to focus the heading of future trends. Forecasting is utilized by organizations to decide how to allot their financial plans for a forthcoming time of time. This is regularly taking into account interest for the merchandise and administrations it offers, contrasted with the expense of creating them.
2) How did Dell fund its 54% growth in 1996? Dell decided to incorporate key performance metrics such as growth, liquidity, and profitability to monitor and adjust its operating procedures to meet its ROIC (Return on Invested Capital) and CCC (Cash Conversion Cycle) goals. In 1996 Dell reduced its days sales of inventory from 34 to 31, improved they accounts receivables from 47 down to 42 days, and maintained low liquidity risks by keeping cash conversion cycle on an average of 40 days. Dell was able to fund its 54% growth maintaining their operating expenses in check, reducing inventories without impacting their ability to deliver finished goods, increasing their short term investments without having to incur into long term debt. 3) Assuming Dell sales will grow 50% in 1997, how might the company fund this growth internally?
Boeing executives wish to come up with a more flexible and fuel efficient jetliner “7E7” to regain market share. First, we choose weighted cost of capital, WACC, to be the proper discount rate for free cash flow, because WACC is the required rate of return of a company as a whole. According to the model, we have to find return on debts and return on equity. Given the estimated period of 30 years, we choose the YTM of a bond will mature on 2038/2/15 as the cost of debts, the number of which is 6.153%. We use CAPM to estimate the cost of equity.
Assuming 2% growth, the terminal value has a NPV of $4,843 million for 2009 and beyond. Note that without the terminal value for sales after 2009, the investment has a negative NPV of $296 million. Discount rate is calculated by; R = Rf + (Rm – Rf), so the US bonds rate (Risk-free rate, Rf) and the evaluated riskiness (), and Market riskiness (Rm) all affect the discount rates. Also note that the operating margins are computed before repayment of capital contributions from vendors or risk sharing partners (RSPs) and launch aid from the partner national governments. 2.
Using the criteria above, we have chosen the best method of production for each requirement in order to help us make our final decision. Income - Level Production Based on income, level production is the best choice. Level production will eliminate overtime costs of $225K and direct labor costs of $265K, reducing the percentage of COGS from 70% to 65.1% of sales. A portion of these savings would be offset by higher storage costs of $115K, which will increase operating costs each month. However, even with these additional costs, net profit under level production is projected to be $520K, which is a 48% increase over the seasonal production estimate of $351K.
PRO FORMA STATEMENTS OF XYZ COMPANY INC. The purpose of this assignment is to present Pro Forma statements for five year projections of XYZ Company Inc., and to make assumptions that support each line item increase or decrease for the forecasted statements. This assignment discusses and interprets the financials in relation to the initiative. As you can see in the attached Excel Workbook, it clearly shows us where the potential discretionary financing needs are in regards to this business. I have assumed that there is an increase in the sales due to the introduction of new product and an increase in the production capacity.
Case 3 Newcastle Division Topic: CVP, Probabilities and Target profits A meeting of senior managers at the Newcastle Division has been called to discuss the pricing strategy for a new product. Part of the discussion will focus on the problem of forecasting sales volume. In the last year a significant number of new products have failed to achieve their forecast sales volumes. The financial accountant has already stated that the profit for the year-end will be lower than budget and the main reason for this is the disappointing sales of new products. A new technique for estimating the probability of achieving target sales and profits will be discussed.