Forecast the dollar amounts of the items in the following table for the BEI usin
ID: 2710612 • Letter: F
Question
Forecast the dollar amounts of the items in the following table for the BEI using the following assumptions:
Bad Education Inc. (BEI)
2014
Forecasting Assumptions
year
Extra Forecast
Year
2014(now)
2015
2016
2017
2018
Sales Growth
10%
12%
6%
6.00%
Net Profit Margin (Net Income/Sales)
14%
14%
14%
14%
Net Operating Working Capital/Sales
5%
5%
5%
5%
Net Operating Fixed Assets/Sales
40%
40%
40%
40%
Total Equity/Total Operating Assets
75%
75%
75%
75%
Bad Education Inc. (BEI)
Actual
Forecasts
Extra Forecast
Numbers in millions
2014
2015
2016
2017
2018
Sales
1000
Net Income
50.25
Net Working Capital
30
Net Fixed Assets
328.875
Total Operating Assets
358.875
Total Equity
224.125
Net Debt
134.75
Assume an 8% cost of equity for this firm whenever you need it in the later problems.
Bad Education Inc. (BEI)
2014
Forecasting Assumptions
year
Extra Forecast
Year
2014(now)
2015
2016
2017
2018
Sales Growth
10%
12%
6%
6.00%
Net Profit Margin (Net Income/Sales)
14%
14%
14%
14%
Net Operating Working Capital/Sales
5%
5%
5%
5%
Net Operating Fixed Assets/Sales
40%
40%
40%
40%
Total Equity/Total Operating Assets
75%
75%
75%
75%
Explanation / Answer
where
sales = previous year sales * sales growth
Netincome = sales * net profit margin
working capital = sales * Net Operating Working Capital/Sales
Fixed assets = sales * Net Operating Fixed Assets/Sales
Total operating assets = working capital + Fixed assets
Total equity = Total operating assets * Total Equity/Total Operating Assets
Total debt = Total operating assets - Total equity
Bad Education Inc. (BEI) Actual Forecasts Extra Forecast Numbers in millions 2014 2015 2016 2017 2018 Sales 1000 1100 1232 1306 1384.2752 Net Income 50.25 154 172 183 193.798528 Net Working Capital 30 55 61.6 65.3 69.21376 Net Fixed Assets 328.875 440 493 522 553.71008 Total Operating Assets 358.875 495 554 588 622.92384 Total Equity 224.125 371 416 441 467.19288 Net Debt 134.75 124 139 147 155.73096