AC413 (2/49) - Forecasting

Base Case
Assumptions

The GAP

Sales Growth
Other Revenues/Sales
COGS/Sales
S&A Exp/Sales
Interest Rate on N/P and L/T Debts
Income Tax Rate
Minority Interest Income
Dividend Payout Ratio

Year 8
16.0%
0.4%
59.0%
23.0%
9.0%
38.0%
n/a
20.0%

AR Turnover
INV Turnover
AP Turnover
PPE Turnover
Growth Rate in PPE and L/T Debts
Long-term Debts/Equity
MI Increase/MI Earnings

220
5.3
9
1.6
13.0%
1.36
n/a

220
5.3
9
1.6
16.0%
1.36
n/a

Year 7
5,284
(3,074)
2,210
(1,270)
20
960
(211)
749
(296)
453

Year 8
6,129
(3,616)
2,513
(1,410)
25
1,128
(218)
910
(346)
564

Year 9
7,110
(4,195)
2,915
(1,635)
28
1,308
(248)
1,061
(403)
658

Year 7

Year 8

Year 9

Income Statements
Sales
Cost of Goods Sold
Gross Profit
S&A Expense
Other Revenues
EBIT
Interest Expense
EBT
Income Tax
Minority Interest Earnings
Net Income

Liabilities and Equity

Accounts Payable
Notes Payable
Other Current Liabilities
Total Current Liabilities
Long-term Debts
Other Liabilities
Total Liabilities
Contributed Capital
Retained Earnings - Beginning
Net Income
Dividends
Retained Earnings - Ending
Treasury Stock
Minority Interest in Subsidiaries
Total Equity
Total Liabilities and Equity

220
5.3
9
1.6
16.0%
1.36
n/a

220
5.3
9
1.6
16.0%
1.36
n/a

220
5.3
9
1.6
16.0%
1.36
n/a

Year 11
9,567
(5,645)
3,923
(2,201)
38
1,760
(333)
1,427
(542)
885

Year 12
11,098
(6,548)
4,550
(2,553)
44
2,042
(386)
1,656
(629)
1,026

Year 11

Year 12

The GAP

Balance Sheets
Assets
Cash and Mkt Securities
Accounts Receivable
Inventories
Other Current Assets
Total Current Assets
PPE - Cost
Accumulated Depreciation
PPE - Net
Other Assets
Total Assets

Year 9
Year 10
Year 11
Year 12
16.0%
16.0%
16.0%
16.0%
0.4%
0.4%
0.4%
0.4%
59.0%
59.0%
59.0%
59.0%
23.0%
23.0%
23.0%
23.0%
9.0%
9.0%
9.0%
9.0%
38.0%
38.0%
38.0%
38.0%
n/a
n/a
n/a
n/a
20.0%
20.0%
20.0%
20.0%

Year 10
8,248
(4,866)
3,382
(1,897)
33
1,518
(287)
1,230
(468)
763

The GAP
Year 10

621
24
579
105
1,329
4,843
(1,453)
3,390
162
4,881

655
28
682
122
1,487
5,473
(1,642)
3,831
188
5,506

759
32
792
141
1,724
6,349
(1,905)
4,444
218
6,386

880
37
918
164
2,000
7,364
(2,209)
5,155
253
7,408

1,021
43
1,065
190
2,320
8,543
(2,563)
5,980
293
8,593

1,185
50
1,235
221
2,691
9,909
(2,973)
6,936
340
9,968

352
40
383
775
2,254
197
3,226
458
1,517
453
(84)
1,886
(689)
1,655
4,881

413
444
858
2,547
229
3,633
458
1,886
564
(113)
2,337
(922)
1,873
5,506

478
515
994
2,955
265
4,213
458
2,337
658
(132)
2,863
(1,149)
2,173
6,386

555
598
1,153
3,427
307
4,888
458
2,863
763
(153)
3,474
(1,412)
2,520
7,408

644
693
1,337
3,976
357
5,670
458
3,474
885
(177)
4,182
(1,716)
2,923
8,593

746
804
1,551
4,612
414
6,577
458
4,182
1,026
(205)
5,003
(2,070)
3,391
9,968

AC413 (2/49) - Forecasting

Base Case
Assumptions

The Limited
Year 8
8.0%
0.4%
67.0%
21.0%
10.0%
38.0%
12.3%
35.0%

Sales Growth
Other Revenues/Sales
COGS/Sales
S&A Exp/Sales
Interest Rate on N/P and L/T Debts
Income Tax Rate
Minority Interest Income
Dividend Payout Ratio
AR Turnover
INV Turnover
AP Turnover
PPE Turnover
Growth Rate in PPE and L/T Debts
Long-term Debts/Equity
MI Increase/MI Earnings

Year 12
8.0%
0.4%
67.0%
21.0%
10.0%
38.0%
12.3%
35.0%

125
5.7
18.8
1.5

125
5.7
18.8
1.5

125
5.7
18.8
1.5

125
5.7
18.8
1.5

125
5.7
18.8
1.5

2.43
60.0%

2.43
60.0%

2.43
60.0%

2.43
60.0%

2.43
60.0%

Income Statements
Sales
Cost of Goods Sold
Gross Profit
S&A Expense
Other Revenues
EBIT
Interest Expense
EBT
Income Tax
Minority Interest Earnings
Net Income

Year 9
Year 10
Year 11
8.0%
8.0%
8.0%
0.4%
0.4%
0.4%
67.0%
67.0%
67.0%
21.0%
21.0%
21.0%
10.0%
10.0%
10.0%
38.0%
38.0%
38.0%
12.3%
12.3%
12.3%
35.0%
35.0%
35.0%

The Limited
Year 7
8,645
(5,738)
2,907
(1,849)
42
1,100
(485)
615
(241)
(46)
328

Year 8

Year 7

Year 8

Balance Sheets

Year 9

Year 10

Year 11

Year 12

Year 11

Year 12

The Limited

Assets
Cash and Mkt Securities
Accounts Receivable
Inventories
Other Current Assets
Total Current Assets
PPE - Cost
Accumulated Depreciation
PPE - Net
Other Assets
Total Assets

312
69
1,007
157
1,545
8,361
(2,508)
5,853
746
8,144

Liabilities and Equity

Accounts Payable
Notes Payable
Other Current Liabilities
Total Current Liabilities
Long-term Debts
Other Liabilities
Total Liabilities
Contributed Capital
Retained Earnings - Beginning
Net Income
Dividends
Retained Earnings - Ending
Treasury Stock
Minority Interest in Subsidiaries
Total Equity
Total Liabilities and Equity

308
599
907
4,674
573
6,154
323
3,306
328
(108)
3,526
(1,926)
67
1,990
8,144

Year 9

Year 10

AC 413 (2/49) - Forecasting

Scenario 1

Reduce prices significantly in order to increase volume

Assumptions
Sales Growth
Other Revenues/Sales
COGS/Sales
S&A Exp/Sales
Interest Rate on N/P and L/T Debts
Income Tax Rate
Minority Interest Income
Dividend Payout Ratio
AR Turnover
INV Turnover
AP Turnover
PPE Turnover
Growth Rate in PPE and L/T Debts
Long-term Debts/Equity
MI Increase/MI Earnings

Scenario 2

The Limited
Year 8
13.0%
0.4%
67.0%
20.0%
10.0%
38.0%
12.3%
35.0%
125
5.7
18.8
1.7
2.43
60.0%

AR Turnover
INV Turnover
AP Turnover
PPE Turnover
Growth Rate in PPE and L/T Debts
Long-term Debts/Equity
MI Increase/MI Earnings

Scenario 3

AR Turnover
INV Turnover
AP Turnover
PPE Turnover
Growth Rate in PPE and L/T Debts
Long-term Debts/Equity
MI Increase/MI Earnings

125
5.7
18.8
1.7
2.43
60.0%

The Limited
Year 8
6.0%
0.4%
62.0%
20.7%
10.0%
38.0%
12.3%
35.0%
125
5.6
18.8
1.45
2.43
60.0%

Year 9
Year 10 Year 11 Year 12
6.0%
6.0%
6.0%
6.0%
0.4%
0.4%
0.4%
0.4%
62.0%
62.0%
62.0%
62.0%
20.7%
20.7%
20.7%
20.7%
10.0%
10.0%
10.0%
10.0%
38.0%
38.0%
38.0%
38.0%
12.3%
12.3%
12.3%
12.3%
35.0%
35.0%
35.0%
35.0%
125
125
125
5.6
5.6
5.6
18.8
18.8
18.8
1.45
1.45
1.45
Same as growth in PPE-Net
2.43
2.43
2.43
60.0%
60.0%
60.0%

125
5.6
18.8
1.45
2.43
60.0%

Centralize all purchasing, storage, credit, and other

administrative activities

Assumptions
Sales Growth
Other Revenues/Sales
COGS/Sales
S&A Exp/Sales
Interest Rate on N/P and L/T Debts
Income Tax Rate
Minority Interest Income
Dividend Payout Ratio

125
125
125
5.7
5.7
5.7
18.8
18.8
18.8
1.7
1.7
1.7
Same as growth in PPE-Net
2.43
2.43
2.43
60.0%
60.0%
60.0%

Eliminate lower-margin products and place more emphasis on

higher-margin products

Assumptions
Sales Growth
Other Revenues/Sales
COGS/Sales
S&A Exp/Sales
Interest Rate on N/P and L/T Debts
Income Tax Rate
Minority Interest Income
Dividend Payout Ratio

Year 9
Year 10 Year 11 Year 12
13.0%
13.0%
13.0%
13.0%
0.4%
0.4%
0.4%
0.4%
67.0%
67.0%
67.0%
67.0%
20.0%
20.0%
20.0%
20.0%
10.0%
10.0%
10.0%
10.0%
38.0%
38.0%
38.0%
38.0%
12.3%
12.3%
12.3%
12.3%
35.0%
35.0%
35.0%
35.0%

The Limited
Year 8
8.0%
0.4%
65.0%
17.0%
10.0%
38.0%
12.3%
35.0%
125
5.9
18.8
1.5
2.43
60.0%

Year 9
Year 10 Year 11 Year 12
8.0%
8.0%
8.0%
8.0%
0.4%
0.4%
0.4%
0.4%
65.0%
65.0%
65.0%
65.0%
17.0%
17.0%
17.0%
17.0%
10.0%
10.0%
10.0%
10.0%
38.0%
38.0%
38.0%
38.0%
12.3%
12.3%
12.3%
12.3%
35.0%
35.0%
35.0%
35.0%
125
125
125
5.9
5.9
5.9
18.8
18.8
18.8
1.5
1.5
1.5
Same as growth in PPE-Net
2.43
2.43
2.43
60.0%
60.0%
60.0%

125
5.9
18.8
1.5
2.43
60.0%