1. The authors set forth a seven-step forecasting game plan for preparing pro forma financial statements. Discuss the seven steps necessary to prepare the three principal financial statements. (CH10)
2. Sales numbers are determined by both a volume component and price component. Projecting prices depends on factors specific to the firm and its industry that might affect demand and price elasticity. Discuss whether it would be likely that the firm would be able to raise future prices for different types of business. (CH10)
3. As an analyst it is important when projecting sales to make estimates about future changes in sales volume. Compare how you might make estimates about future sales value for a company in different stage of life cycle. (CH10)
4. Calculate the firm's cost of equity capital using the CAPM model. (CH11)
5. Discuss the three components of CAPM model. (CH11)
6. Why a firms dividend policy is irrelevant? Discuss the key assumption in the theory. (CH11)
7. Explain free cash flows. Describe which types of cash flows are free and which are not. (CH12)
8. Discuss under which scenario it is appropriate to use free cash flows for all debt and equity capital stakeholders. (CH12)
9. Provide the rationale for using expected free cash flow in valuation. (CH12)
10. What three elements are needed to value a resource when using cash flows? (CH12)