Finance Week 6

02 Jul Finance Week 6

Posted at 13:29h in College by Homework Writer

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With the partial model please forecast Zieber’s 2017 income statement and balance sheets. Use the following assumptions: (1) Sales grow by 6%. (2) The ratios of expenses to sales, depreciation to fixed assets, cash to sales, accounts receivable to sales, and inventories to sales will be the same in 2017 as in 2016. (3) Zieber 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) Regular dividends grow at an 8% rate. Calculate the additional funds 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.

What are the forecasted levels of the line of credit and special dividends? (Hints: Create a column showing the ratios for the current year; then create a new column showing the ratios used in the forecast. Also, create a preliminary forecast that doesn’t include any new line of credit or special dividends. Identify the financing deficit or surplus in this preliminary forecast and then add a new column that shows the final forecast that includes any new line of credit or special dividend.)
Now assume that the growth in sales is only 3%. What are the forecasted levels of the line of credit and special dividends?

Scoring Rubric

Criteria	Exemplary	Accomplished	Developing	Beginning
	Levels of Achievement
Excel File Weight 50.00%	100 % Models were estimated with great accuracy, using Excel and provided relevant outputs in an excel file	85 % Models were estimated with moderate accuracy, using Excel and provided relevant outputs in an excel file	75 % Models were estimated with inaccuracy, using Excel and provided relevant outputs in an excel file	50 % Model estimations are mostly incorrect, or no model was provided
Interpretation Weight 50.00%	100 % Interpretations are provided with great accuracy by addressing all the required questions, and minimum words requirement is met	85 % Interpretations are provided with moderate accuracy by addressing most of all required questions, and minimum words requirement is met	75 % Interpretations are provided with many errors, and, some of important questions were not answered. Minimum words requirement is not met.

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