It is currently the end of 2019, and you have been asked to determine the projected...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
It is currently the end of 2019, and you have been asked to determine the projected cash flows of your firm, Home Depot (symbol: HD), next year for decision-making purposes. Below is some financial statement information that is loosely based on HD for the fiscal year ended December 31, 2022: Income Statement (in millions $) Year Ended December 31, 2022 Sales Cost of Sales Gross Income Selling, General, Administrative Expenses Depreciation Interest Expense Pre-Tax Income Tax Net Income 151,000 100,000 51,000 25,400 2,400 1,300 21,900 5,300 16,600 a) Construct a pro-forma income statement for December 31, 2023. Management assumes that sales will grow by 10 percent next year. Also assume that net property, plant, and equipment at the end of 2021 is valued at $30,700M, net property, plant, and equipment at the end of 2022 is valued at $31,200M, long-term debt at the end of 2021 is $41,200M, and long-term debt at the end of 2022 is valued at $42,000M. b) Suppose that management plans to issue a large dividend of $15,000M and purchase $3,000M worth of new buildings and equipment in 2023. Using this information and numbers from part (a), calculate the following: (1) projected net, property, plant and equipment at the end of 2023, and (2) projected shareholders' equity at the end of 2023. Assume that shareholders' equity at the end of 2022 equals negative $1,700M. c) Using numbers from parts (a) and (b), calculate the projected net funding need for HD in 2023. Management projects that net working capital will increase by $1,500M in 2023. d) What is the projected free cash flow in 2023? If the free cash flow is projected to grow at 2% per year in perpetuity, and the discount rate for these free cash flows is 6.5%, then what is the present value in 2022 of all HD free cash flows? It is currently the end of 2019, and you have been asked to determine the projected cash flows of your firm, Home Depot (symbol: HD), next year for decision-making purposes. Below is some financial statement information that is loosely based on HD for the fiscal year ended December 31, 2022: Income Statement (in millions $) Year Ended December 31, 2022 Sales Cost of Sales Gross Income Selling, General, Administrative Expenses Depreciation Interest Expense Pre-Tax Income Tax Net Income 151,000 100,000 51,000 25,400 2,400 1,300 21,900 5,300 16,600 a) Construct a pro-forma income statement for December 31, 2023. Management assumes that sales will grow by 10 percent next year. Also assume that net property, plant, and equipment at the end of 2021 is valued at $30,700M, net property, plant, and equipment at the end of 2022 is valued at $31,200M, long-term debt at the end of 2021 is $41,200M, and long-term debt at the end of 2022 is valued at $42,000M. b) Suppose that management plans to issue a large dividend of $15,000M and purchase $3,000M worth of new buildings and equipment in 2023. Using this information and numbers from part (a), calculate the following: (1) projected net, property, plant and equipment at the end of 2023, and (2) projected shareholders' equity at the end of 2023. Assume that shareholders' equity at the end of 2022 equals negative $1,700M. c) Using numbers from parts (a) and (b), calculate the projected net funding need for HD in 2023. Management projects that net working capital will increase by $1,500M in 2023. d) What is the projected free cash flow in 2023? If the free cash flow is projected to grow at 2% per year in perpetuity, and the discount rate for these free cash flows is 6.5%, then what is the present value in 2022 of all HD free cash flows?
Expert Answer:
Answer rating: 100% (QA)
The question consists of several parts so Ill break it down accordingly a Construct a proforma income statement for December 31 2023 with the assumption that sales will grow by 10 percent and that the ... View the full answer
Related Book For
Financial Management for Public Health and Not for Profit Organizations
ISBN: 978-0132805667
4th edition
Authors: Steven A. Finkler, Thad Calabrese
Posted Date:
Students also viewed these finance questions
-
BACKGROUND You are an information analyst working for NEE. The company president has asked you to prepare a Quantitative analysis of financial, sales, and operations data to help determine which...
-
D Hawk entered the market in early 2018. D Hawk manufactures camera drones, selling primarily to retailers. D Hawk is pleased with its financial performance over its first few years of operations,...
-
Case Swimmers Headphones1 Finally! Its the end of 2019 and you are sitting at your new desk in a plush office in north Bogota, with a delicious cup of Colombian coffee. You think about all it took to...
-
Write a static method that takes a domain name as its argument and returns the reverse domain name (reverse the order of the strings between periods). For example, the reverse domain name of...
-
1. What illegal material did Professor Angevine store on his university computer? 2. How did the police find this illegal material? 3. Did the police obtain a search warrant before conducting this...
-
Micks Wicks makes candles in various sizes. Create a class for the business named Candle that contains data fields for color, height, and price. Create get methods for all three fields. Create set...
-
Fill in the Blank. The velocity with which a representative point moves along a trajectory is called the ___________ velocity.
-
Selected sales and operating data for three divisions of three different companies are given below: Required: 1. Compute the return on investment (ROI) for each division, using the formula stated in...
-
They define the term law and describe the sources from which the law is derived. Define the preceding legal terms, res judicata, stare decisis, original jurisdiction, and appellate jurisdiction....
-
You are a health care manager at a nursing home. You are looking to expand your business arrangements and your boss suggests Stanford Health as an option. She asks you to do an analysis on their...
-
Let T: be defined by x 7 (2 , 3 , ...) where x is given by x = (1 , 2 , ...) and 1 p < +. If || = 1, determine whether is an eigenvalue of T?
-
Why is the foreign exchange market often referred to as the market that never sleeps?
-
What is unique about valuing cross-border acquisitions? What valuation methodology would you recommend?
-
Explain what ijara or leasing is and how it can be reconciled with the principles of Islamic finance. Is it appropriate to refer to ijara as debt-like financing?
-
Why is foreign exchange trading directly linked to trade in goods and services accounting for only 15 percent of the foreign exchange market turnover?
-
What are the key motivations for firms to expand abroad?
-
Jene Withers, CFA, uses a statistical model to estimate the intrinsic value of potential investments. Clients are aware of the general model but not its details. Withers recently changed the model in...
-
Experiment: Tossing four coins Event: Getting three heads Identify the sample space of the probability experiment and determine the number of outcomes in the event. Draw a tree diagram when...
-
Is financial management important for public service organizations? If so, why?
-
The Stratton Township Park is located on a piece of property that contains two golf courses, a swimming pool, and 800 acres of woods and open spaces. Three years ago, the Stratton Park Department...
-
What are several incentive approaches? Are there weaknesses in any of the approaches?
-
When we are given the value of the _____________________ variable, we can use the least-squares regression line to predict the value of the ______________________ variable. In Exercises 57, fill in...
-
The least-squares regression line predicts the result of changing the value of the explanatory variable. In Exercises 812, determine whether the statement is true or false. If the statement is false,...
-
For each of the following plots, interpret the y-intercept of the least-squares regression line if possible. If not possible, explain why not. a. The least-squares regression line is = 1.98 +...
Study smarter with the SolutionInn App