B 10 Start with the partial model in the file Ch12 P10 Build a Model.xlsx on the textbook's Web site, which contains the 2016 financial statements of Zieber Corporation. Forecast Zeiber'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) Zeiber 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% Ft (6) Calculate the 9 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 11 additional interest expense for the new line of credit. If surplus funds are available, pay a special dividend. 12 13 14 Key Input Data: Used in the 15 forecast 16 Tax rate 40% 17 Dividend growth rate 8% 18 Rate on notes payable-term debt, ratd 9% 19 Rate on long-term debt, la 11% 20 Rato on line of credit, Pog 12% 21 22 23 a. What are the forecasted levels of the line of credit and special dividends ? (Hints: Create a column showing the ratios for the 24 current year, then create a new column showing the ratios used in the forecast. Also, create a preliminary forecast that 25 doesn't include any new line of credit or special dividends. Identify the financing deficit or surplus in this preliminary forecast 26 and then add a new column that shows the final forecast that includes any new line of credit or special dividend.) 27 28 Begin by calculating the appropriate historical ratios in Column E. Then put these ratios and any other input ratios in Column 29 G 30 31 Forecast the preliminary balance sheets and income statements in Column H. Don't include any line of credit or special 32 dividend in the preliminary forecast 33 34 35 After completing the preliminary forecast of the balance sheets and income statement, go to the area below the preliminary 38 forecast and identify the financing deficit or surplus. Then use Excel's IF statements to specify the amount of any new line of 37 credit OR special dividend you should not have a new line of credit AND a special dividend, only one or the other). 38 39 After specifying the amounts of the special dividend or line of credit, create a second column (l) for the final forecast next to 40 the column for the preliminary forecast (H). In this final forecast, be sure to include the effect of the special dividend or line of 41 Credit 2017 Preliminary forecast (doesn't include special dividend or LOC) $482,459 $410,090 2017 Final forecast (includes special dividend or LOC) Percent of forecasted fixed assets. 2 43 44 Income Statements: 45 (December 31, in thousands of dollars) 46 47 48 Sales 49 Expenses (excluding depr. & amort) 50 Depreciation and Amortization 51 EBIT 52 Interest expense on long-term debt 53 Interest expense on line of credit 54 EBT 55 Taxes (40%) 56 Net Income 57 58 Common dividends regular dividends) 59 Special dividends 60 Addition to retained earnings 61 Balance Sheets 63 (December 31, in thousands of dollars) 2016 Historical 2017 Input 2016 ratios Forecasting basis ratios $455,150 Growth 6.0% $386,878 % of sales 85.0% $14,565 % of fixed assets 0.08 $53,708 $11,880 Interest rate x average debt during year $0 $41,828 $16,731 $25,097 $12,554 Growth Zero in preliminary forecast $12,543 2016 Historical ratios 2017 Input ratios 2017 Preliminary forecast (doesn't Include special dividend or LOC) 2017 Final forecast (includes special dividend or LOC) 2016 Forecasting basis % of sales % of sales % of sales $18,206 $100,133 $45,515 $163,854 $182,060 $345,914 % of sales 55 56 Assets 67 Cash 68 Accounts Receivable 69 Inventories 70 Total current assets 71 Fixed assets 72 Total assets 73 74 Liabilities and equity 75 Accounts payable 75 Accruals 77 Line of credit 78 Total current liabilities 79 Long-term debt 80 Total liabilities 81 Common stock 82 Retained Earnings Total common equity 84 Total abilities and equity % of sales of sales Zero in preliminary forecast $31,861 $27,309 $0 $59,170 $120,000 $179,170 $60,000 $106.745 $166,745 $345.914 Previous Previous Previous + Addition to retained earnings 85 86 Identify Financing Deficit or Surplus 87 88 Increase in spontaneous liabilities (accounts payable and accruals) 89 Increase in long-term bonds, preferred stock and common stock 90 + Net income in preliminary forecast) minus regular common dividends 91 Increase in financing 92 93 - Increase in total assets 96 Amount of financing deficit or surplus 96 If deficit in financing (negative), show the amount for the line of credit 97 If surplus in financing positive show the amount of the special dividend 98 99 a. What are the forecasted levels of the line of credit and special dividends? 100 101 Required ine of credit Note: we copied values from 19:H100 when sales growth in 651 8 102 Special dividende 103 104 b. Now assume that the growth in sales is only 3% (do this by changing the growth rate in Coll 651). What are the forecasted 105 levels of line of credit and special dividends? 100 107 Required ine of credit Not we copied values from H100 when sales growth in 051-3 108 Special dividends 100