Use the same data as in Problem 1.
Data as in Problem 1
Using the data in the student spreadsheet file P&G.xlsx (to find the student spreadsheets for Financial Analysis with Microsoft Excel, seventh edition, go to www.cengagebrain.com) forecast the June 30, 2014, income statement and balance sheet for Procter & Gamble. Use the percent of sales method and the following assumptions: (1) Sales in FY 2014 will be $85,000; (2) The tax rate will be 25.24%; (3) Each item that changes with sales will be the five-year average percentage of sales; (4) No preferred dividends will be paid; and (5) The common dividend payout ratio will be 50% of income available to common stockholders. Use your judgment on all other items.
a. Recalculate the percentage of sales income statement, but this time use the TREND function to forecast other income and interest expense.
b. Recalculate the percentage of sales balance sheet, but this time use the TREND function to forecast cash, gross property plant and equipment, goodwill, intangible assets, and other long-term assets.
c. Do these new values appear to be more realistic than the original values? Does this technique make sense for each of these items? Might other income statement or balance sheet items be forecasted in this way?