FM S 2012 HW5 Solution

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FIRST FINANCIAL MODELSales growth Current assets/Sales Current liabilities/Sales Net fixed assets/Sales Costs of goods sold/Sales Depreciation rate Interest rate on debt Interest paid on cash and marketable securities Tax rate Dividend payout ratio Year Income statement Sales Costs of goods sold Interest payments on debt Interest earned on cash and marketable securities Depreciation Profit before tax Taxes Profit after tax Dividends Retained earnings Balance sheet Cash and marketable securities Current assets Fixed assets At cost Depreciation Net fixed assets Total assets Current liabilities Debt Stock Accumulated retained earnings Total liabilities and equity 10% 15% 8% 77% 50% 10% 10.00% 8.00% 40% 40% 0 1,000 (500) (32) 6 (100) 374 (150) 225 (90) 135 1 1,100 (550) (32) 9 (117) 410 (164) 246 (98) 148 2 1,210 (605) (32) 14 (137) 450 (180) 270 (108) 162 3 1,331 (666) (32) 20 (161) 492 (197) 295 (118) 177

80 150 1,070 (300) 770 1,000 80 320 450 150 1,000

144 165 1,264 (417) 847 1,156 88 320 450 298 1,156

213 182 1,486 (554) 932 1,326 97 320 450 460 1,326

289 200 1,740 (715) 1,025 1,513 106 320 450 637 1,513

Year 0 Free cash flow calculation Profit after tax Add back depreciation Subtract increase in current assets Add back increase in current liabilities Subtract increase in fixed assets at cost Add back after-tax interest on debt Subtract after-tax interest on cash and+A14 mkt. securities Free cash flow

1 246 117 (15) 8 (194) 19 (5) 176

2 270 137 (17) 9 (222) 19 (9) 188

3 295 161 (18) 10 (254) 19 (12) 201

CONSOLIDATED STATEMENT OF CASH FLOWS: RECONCILING THE CASH BALANCCash flow from operating activities Profit after tax 246 270 295

Add back depreciation Adjust for changes in net working capital: Subtract increase in current assets Add back increase in current liabilities Net cash from operating activities Cash flow from investing activities Aquisitions of fixed assets--capital expenditures Purchases of investment securities Proceeds from sales of investment securities Net cash used in investing activities Cash flow from financing activities Net proceeds from borrowing activities Net proceeds from stock issues, repurchases Dividends paid Net cash from financing activities Net increase in cash and cash equivalents Check: changes in cash and mkt. securities

117 (15) 8 356

137 (17) 9 400

161 (18) 10 448

(194) 0 0 (194)

(222) 0 0 (222)

(254) 0 0 (254)

0 0 (98) (98) 64 64

0 0 (108) (108) 70 70

0 0 (118) (118) 76 76

L

4 1,464 (732) (32) 26 (189) 538 (215) 323 (129) 194

5 1,611 (805) (32) 33 (220) 587 (235) 352 (141) 211