Lecture 2 - SupplMat

8/12/2019 Lecture 2 - SupplMat

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Point of departure

Sumo Corp - Income Statement for 2012

2012

Sales 6,000.0COGS (70% of sales) 4,200.0Operating expenses 500.0EBIT 1,300.0Interest expense 150.0Taxable income 1,150.0

Tax (40% tax rate) 460.0Net income 690.0Dividend (1/3 of NI) 230.0

Addition to retained earnings 460.0

Planned growth rate (g) 20.0%

Return on assets (ROA) 11.5%

Return on Equity (ROE) 20.3%

Retention Rate 66.7%

Internal growth rate (gi) 8.3%

Sustainable growth rate (g*) 15.6%

EFN with g = 20% and realistic assumptions

Sumo Corp - Pro-Forma Income Statement for 2013

2012 2013F

Sales (+g%) 6 000 0 7 200 0


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Sales (+g%) 6 000 0 7 200 0

iii) Accounts payable do not change

Sumo Corp - Por-Forma Income Statement for 2013

2012 2013F

Sales (+g%) 6,000.0 7,200.0COGS (70% of sales) 4,200.0 5,040.0Operating expenses(+ g%) 500.0 600.0EBIT 1,300.0 1,560.0Interest expense (+ g%) 150.0 180.0

Taxable income 1,150.0 1,380.0Tax (40% tax rate) 460.0 552.0Net income 690.0 828.0

Dividend (1/3 of NI) 230.0 276.0Addition to retained earnings 460.0 552.0

EFN with g = gi and simplifying assumptions

i) Operating expenses grow at g

ii) Interest expenses grow at g

iii) Accounts payable do not change


2012 2013F


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EFN with g = g* and simplifying assumptions

i) Operating expenses grow at g

ii) Interest expenses grow at g iii) Accounts payable do not change


2012 2013F

Sales (+g%) 6,000.0 6,938.8

COGS (70% of sales) 4,200.0 4,857.1Operating expenses(+ g%) 500.0 578.2EBIT 1,300.0 1,503.4Interest expense (+ g%) 150.0 173.5Taxable income 1,150.0 1,329.9Tax (40% tax rate) 460.0 532.0Net income 690.0 798.0Dividend (1/3 of NI) 230.0 266.0Addition to retained earnings 460.0 532.0


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Sumo Corp - Balance Sheet as of December 2012

Assets: 2012 Liabilities & Equity:

Cash 320.0 Accounts payableAccounts receivable 880.0 Notes payableInventory 1,200.0 Current liabilitiesCurrent assets 2,400.0

Long-term debtNet fixed assets 3,600.0

Common stockRetained earningsTotal equity

Total assets 6,000.0 Total liabilities and equity

Sumo Corp - Pro-Forma Balance Sheet as of December 2013 Sumo Corp - Pro-Forma Balan

Assets: 2012 2013F Change Liabilities & Equity:

Cash (+g%) 320 0 384 64 0 Accounts payable (+g%)


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Sumo Corp - Pro-Forma Balance Sheet as of December 2013


Cash (+g%) 320.0 384.0 64.0 Accounts payable (no change)Accounts receivable (+g%) 880.0 1,056.0 176.0 Notes payable (no change)Inventory (+g%) 1,200.0 1,440.0 240.0 Current liabilitiesCurrent assets 2,400.0 2,880.0 480.0

Long-term debt (no change)

Net fixed assets (+g%) 3,600.0 4,320.0 720.0Common stock (no change)Retained earnings

Total equity

Total assets 6,000.0 7,200.0 1,200.0 Total liabilities and equity

EFN = 648




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Cash (+g%) 320.0 370.1 50.1 Accounts payable (no change)

Accounts receivable (+g%) 880.0 1,017.7 137.7 Notes payable (no change)Inventory (+g%) 1,200.0 1,387.8 187.8 Current liabilitiesCurrent assets 2,400.0 2,775.5 375.5

Long-term debt (no change)Net fixed assets (+g%) 3,600.0 4,163.3 563.3

Common stock (no change)Retained earningsTotal equity

Total assets 6,000.0 6,938.8 938.8 Total liabilities and equity

EFN = 406.8


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2012

600.0200.0800.0

1,800.0

1,400.02,000.03,400.0

6,000.0

Complete balance sheet - cover EFN with both LTD

ce Sheet as of December 2013 Sumo Corp - Pro-Forma Balance Sheet as of Decem

2012 2013F Change Liabilities & Equity: 2012 2013F

600 0 720 120 0 Accounts payable (+g%) 600 0 720


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2012 2013F Change

600.0 600.0 -200.0 200.0 -800.0 800.0 -

1,800.0 1,800.0 -

1,400.0 1,400.0 -2,000.0 2,552.00 552.0

3,400.0 3,952.0 552.0

6,000.0 6,552.0 552.0

2012 2013F Change


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EFN from previous step = 406.8

Complete balance sheet - cover EFN by issuing deb

2012 2013F Change 2012 2013F

600.0 600.0 - Accounts payable (no change) 600.0 600.0

200.0 200.0 - Notes payable (no change) 200.0 200.0800.0 800.0 - Current liabilities 800.0 800.0

1,800.0 1,800.0 - Long-term debt (no change) 1,800.0 2,206.8

1,400.0 1,400.0 - Common stock (no change) 1,400.0 1,400.02,000.0 2,532.0 532.0 Retained earnings 2,000.0 2,532.03,400.0 3,932.0 532.0 Total equity 3,400.0 3,932.0

6,000.0 6,532.0 532.0 Total liabilities and equity 6,000.0 6,938.8

D/E 76.5% 76.5%


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and Equity

ber 2013

Change

120 0


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t

Change

-

--

406.8

-532.0532.0

938.8


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GOOGLE INC (IPO in 2004)

$ million 2004 2005 2006 2007 2008assets 3,313.4 10,271.8 18,473.4 25,335.8 31,767.6

equity 2,929.1 9,419.0 17,039.8 22,689.7 28,238.9debt 384.3 852.9 1,433.5 2,646.1 3,528.7cash 2,143.4 8,034.2 11,243.9 14,218.6 15,845.8revenues 3,189.2 6,139.6 10,604.9 16,594.0 21,795.6net income 399.1 1,465.4 3,077.4 4,203.7 4,226.9dividends - - - - -stock issuance 1,195.0 4,372.3 2,384.7 23.9 71.5-ROA 12.0% 14.3% 16.7% 16.6% 13.3%

ROE 13.6% 15.6% 18.1% 18.5% 15.0%r 100.0% 100.0% 100.0% 100.0% 100.0%D/A 11.6% 8.3% 7.8% 10.4% 11.1%

cash/assets 64.7% 78.2% 60.9% 56.1% 49.9%actual g - 92.5% 72.7% 56.5% 31.3%

internal g 13.7% 16.6% 20.0% 19.9% 15.3%sustainable g 15.8% 18.4% 22.0% 22.7% 17.6%stock issuance/equity 149.3% 25.3% 0.1% -0.3%

actual g - 92.5% 72.7% 56.5% 31.3%gi 13.7% 16.6% 20.0% 19.9% 15.3%g* 15.8% 18.4% 22.0% 22.7% 17.6%debt/assets 11.6% 8.3% 7.8% 10.4% 11.1%cash/assets 64.7% 78.2% 60.9% 56.1% 49.9%stock issuance 1,195.0 4,372.3 2,384.7 23.9 71.5-


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Documents

Lecture 2 - SupplMat