Pro Forma Financials

Learning Outcomes By the end of this section, you will be able to: In this section of the chapter, we will move beyond the sales forecast and look at the general nature, length, and timeline of forecasts and the risks…

Forecasting Sales

Learning Outcomes By the end of this section, you will be able to: In this section of the chapter, you will begin to explore the first step of creating a forecast: forecasting sales. We will discuss common time frames for…

Why It Matters

Figure 18.1 Forecasts are an important financial tool. (credit: modification of “Red Post-It Label, Calculator and Ballpen” by photosteve101/flickr, CC BY 2.0) Chapter Outline 18.1 The Importance of Forecasting 18.2 Forecasting Sales 18.3 Pro Forma Financials 18.4 Generating the Complete Forecast 18.5 Forecasting Cash Flow and Assessing…

Problems

1. SodaFizz has debt outstanding that has a market value of $3 million. The company’s stock has a book value of $2 million and a market value of $6 million. What are the weights in SodaFizz’s capital structure? 2. The…

Review Questions

1. Why does a company’s capital have a cost? 2. Why is the rate that debt holders require to entice them to lend money to a company different from the company’s effective cost of debt capital? 3. Assume that the…

Key Terms

after-tax cost of debtthe net cost of interest on a company’s debt after taxes; the firm’s effective cost of debt capitala company’s sources of financing capital structurethe percentages of a company’s assets that are financed by debt capital, preferred stock…