What will be the firm-specific influences on sales growth rates forecast?

The actual eVal Excel
forecasting model must be
submitted with the assignment.
Open eVal model and go to the “Forecasting Assumptions”
worksheet. You will see 5 years of historical data on each of forecasting
assumptions lines and 11 years of forecast data in shaded cells. The model
calculated 5 years of historical data based on the company’s information you
entered while completing the assignment #1. Your job is to fill in shaded cells
of forecast assumptions.
Play with the model a bit to see how forecast changes.
YOUR SPECIFIC
ASSIGNMENT IS:
1. Introduction. The paper should begin
with a short introduction (explains the purpose of the paper and provides an
overview of the contents that follow) (5%
of the project grade)
2. Explanation of Sales Growth Rates – Include
an explanation about sales growth rate projections for the company for the next
11 years. Justify the terminal growth rate.
(15 % of the project grade).
You analysis should be based on your findings Step 1 in
the Assignment #1. Remember, the part of the assignment #1 was STEP 1: Collecting
information and data about the company and projections of the company’s future
financial performance. What do your forecasts indicate for the future sales
growth rates? How will the industry forecast affect future sales growth rates?
What will be the firm-specific influences on sales growth rates forecast?

Justify the terminal growth rate. Note:
it is difficult to justify terminal or long-term growth rates that exceed the long-term
growth rate of the economy, e.g., about 3%; in the short-run, higher rates may
be appropriate. It was the part of your assignment #1 (Step 2 of the assignment
#1) to find the forecast of
the U.S. economy growth rates (short-term and long-term). Please use your
findings of the forecast of long-term
growth rates of the U.S. economy to justify the terminal sales growth rates of
the company. You should reference the
source of the information about U.S. economy growth rates.

It is important to check that your
terminal sales growth rate assumption is not
greater than the cost of equity capital (See the number in cell B20 on
“Model Summary” worksheet). If your terminal sales growth rate assumption is
greater than the cost of equity capital, the model will not work, and you will
get error messages.

3. Explanation of All Other Assumptions – (20% of the project grade).
Include an explanation of all other assumptions
related to future operating performance including costs, margins, efficiency, capitalization,
etc. that appears on the “Forecasting Assumptions” worksheet of eVal model for the next 11 years. Any
changes in the assumptions should be explained and analyzed.
Note: We provided an
Excel worksheet titled “Analysis of eVal Assumptions Forecast”. This worksheet
is posted in Content – Assignment #2 and must be submitted with the assignment.
All assumptions used in the forecast need to be
explained in the written analysis. An Excel worksheet “Analysis of eVal Assumptions Forecast” should be incorporated as a
“table” in the written analysis.
4. Explanation and Interpretation of Projected
Financial Statements – Explanation and interpretation of the projected financial
statements and discounted free cash flows should include pro forma financial
statements (income statements, balance sheets, and statements of cash
flows). (15% of the project grade).
a) Your
analysis should be based on your findings Step 1 in the Assignment #1 and
projections of the company’s future financial performance. What do your
forecasts indicate for the future financial statements and cash flows?
b)
Please include the analysis of the Net Issuance of Common Stock (line 39 of Cash flow Analysis
worksheet of the eVal model). What does it mean “Net Issuance of Common Stock”
in Cash Flow Analysis? Why is it important? What does the positive or negative
amount of Net Issuance of Common Stock mean?
c)
What does it mean “plug”
of the model? Why is it important?
d)
Does your forecast correspond to the market conditions?
Does management anticipate using excess cash for stock repurchases, if so? If
not, what will be the source of financing of stock repurchase? Do you need to
go back to your forecasting assumptions and change them to make the forecast
more reliable? (Please do that and explain in your written report!)

5. Explanation and Interpretation of Overall
Forecast Results and the projected ratio
analysis (20% of the project grade)
Click on the
Ratio Analysis and Cash flow Analysis tabs and see a complete ratios and cash
flows implied with your assumptions. Do these forecasted ratios correspond to
your finding and your views about the firm’s future? What do your forecasts
imply for the future ratios and cash flows? How reasonable ratio and free cash
flow analysis of the future financial statements are?
Please also
include in your written report the analysis of the “Implied Return of Equity” that appears on the line 11 of the
“Forecasting Assumptions” worksheet of the eVal model.

6. Reflection – the students should write
a paragraph in their own words reflecting on specifically what they learned
from the assignment and how they think they could apply what they learned in
the workplace. (10% of the project
grade)

Organization,
Presentation, Spelling, punctuation, and grammar totally are 15% of the
assignment grade.

Writing The discussion portion of the
analysis should be about 5-7 pages in length (more is OK!), double spaced, and should employ APA
style and format for reference citations. Supporting data (e.g., figures,
tables, etc.) and references should be submitted limited to four separate
attachments in an appendix after the written portion of the paper.

The paper should begin with a short
introduction (explains the purpose of the paper and provides an overview of the
contents that follow) and then proceed to examine the four topics outlined in
the previous section.
Written
projects:
Must be typed, double-spaced,
in 12-point Times New Roman or Arial font, with one-inch margins
Must have the title page in
APA-7th style
Must have in-text citations
in APA-7th edition style
Must have reference list in
APA-7th edition style. Please note that you must reference the
data you are using for the project
Must be prepared using word
processing software (Microsoft Word preferred)

The subheadings used in the paper should be:
1. Introduction (explains the
purpose of the paper and provides an overview of the contents that follow)
2. Explanation of Growth Rates
3. Explanation of All Other
Assumptions
4. Explanation and Interpretation
of Projected Financial Statements.
5. Explanation an Interpretation of
Overall Forecast Results & Financial Ratios
6. Reflection

Completeness of analysis: The
analysis must demonstrate a solid understanding of forecasting and analysis.
All assumptions used in preparing the projections of the company need to be thoroughly
explained.

Organization: The paper should be well-organized and
follow a logical pattern of analysis and discussion.

Presentation: Papers should
meet professional business standards and meet APA formatting
requirements. No more than 20% of the text of the project should
be made up of quotes.
Please note that
starting from the Fall 2020 semester the UMGC moved to the 7th Edition of the
APA Style. The links to the 7th Edition of the APA Style methodology are
posted in Content – Course Resources – Writing Resources.

Spelling, punctuation, and
grammar: There should be few errors in grammar and punctuation. All
sentences must be complete and well-structured.

Submission.
You should submit the following three
files:
1) The
completed
paper is to be submitted to the “Assignments” folder in LEO location designated
for the assignment #2. The paper must be
in Word format otherwise no credit is earned for the assignment.
2)
The eVal Excel forecasting model.
3) “Analysis
of eVal Assumptions Forecast” Excel worksheet.

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