Pace University New York Dolphin Inc Forecasting Model Analysis Paper Refer to the preceding income statement and balance sheet for Dolphin, Inc. to answer

Pace University New York Dolphin Inc Forecasting Model Analysis Paper Refer to the preceding income statement and balance sheet for Dolphin, Inc. to answer the following questions. Dolphin is a $600 million event promotion company that operates with a 30 percent operating tax rate. You are evaluating making an equity investment in Dolphin, and you want to develop a set of forecasted financial statements. As a start, analyze the historical Income Statement and Balance Sheet of Dolphin for the prior and current year by filling in the blanks in the following table. Insert the description of the typical analytical metric as well as the resulting calculation. Use percent instead of days for the working capital items. Some of the information has already been inserted for you. (8 Points) Using the results calculated in the prior question, and assuming that the current year trends continue for the next year, fill in the blanks in the following table to project the Income statement, balance sheet items and cash flow for the first year forecast. (14 points) Part 2: Fundamentals of Forecasting – Total 20 points
Use the table below to answer the following questions.
Dolphin: Income Statement and Balance Sheet
$ million
Income statement
Revenues
Cost of sales
Selling, general, and administrative
Depreciation
EBIT
Interest expense
Gain/(loss) on sale of assets
EBT
Taxes
Net income
Dividends
Last year Current year
1,100
1,210
(770)
(871)
(165)
(182)
(33)
(36)
132
121
(15)
(15)
(10)
117
96
(35)
(29)
82
67
33
27
Balance sheet
Last year Current year
Operating cash
22
24
Excess cash and marketable securities
91
74
Accounts receivable
220
242
Inventory
330
363
Current assets
663
703
Property, plant, and equipment
Equity investments
440
50
484
50
1,153
1,237
Accounts payable
Short-term debt
Accrued expenses
Current liabilities
275
90
165
530
303
90
182
574
Long-term debt
Common stock
Retained earnings
210
100
313
210
100
353
1,153
1,237
Total assets
Total liabilities and equity
Refer to the preceding income statement and balance sheet for Dolphin, Inc. to answer the following
questions. Dolphin is a $600 million event promotion company that operates with a 30 percent operating tax
rate.
7
You are evaluating making an equity investment in Dolphin, and you want to develop a set of forecasted financial
statements. As a start, analyze the historical Income Statement and Balance Sheet of Dolphin for the prior and current
year by filling in the blanks in the following table. Insert the description of the typical analytical metric as well as the
resulting calculation. Use percent instead of days for the working capital items. Some of the information has already
been inserted for you. (8 Points)
Dolphin Statement Analysis
Typical Analysis Metric
Line Item
Result
Last Year
Revenues
% change
Cost of Sales
% of Revenues
NA
Current Year
10.0%
70.0%
72.0%
S, G&A
Depreciation
% of prior year PPE
NA
Accounts Receivable
Inventory
% of cost of goods sold
Accounts Payable
Accrued Expenses
Capital Expenditures
% of revenues
NA
6.6%
8
Using the results calculated in the prior question, and assuming that the current year trends continue
for the next year, fill in the blanks in the following table to project the Income statement, balance
sheet items and cash flow for the first year forecast. (14 points)
Forecast
Line Item
Forecast Driver
Formula
Current Year
Revenues
% change
10.0%
1,210
Cost of Sales
% of revenues
72.0%
871
S, G&A
1,331
182
Depreciation
% of prior year PPE
EBIT
Calculated
Interest Expense
% of prior year’s debt
Pretax Income (excluding loss on sale of assets)
Calculated
Taxes
% of Pretax Income
Net Income
Calculated
36
n/a
121
15
106
30.0%
n/a
32
74
Balance Sheet Items
Accounts Receivable
242
Inventory
Current operating assets
Year 1 Forecast
363
Calculated
n/a
605
Accounts Payable
303
Accrued Expenses
182
Current operating liabilities
Calculated
n/a
485
Net Operating Working Capital
Calculated
n/a
120
Property, Plant and Equip.
Prior Year PPE – Dep. + Capex
n/a
484
Cash Flow
Net Income
From above
74
Plus: Depreciation
From above
36
Less: Capital Expenditures
% of revenues
(increase)/decrease in Net Working Capital
Calculated
Free Cash Flow Available for Debt reduction
Calculated
6.6%
(80)
(10)
n/a
20
15

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