Historical and Projected Financia
Ralph Lauren Corp.
Period
Income Statement
Revenues:
Total revenues
Cost of goods sold
Gross profit
Operating Expenses:
Selling, general and administrative
Equity in earnings
Non-recurring items
Unreconciled Amt.
Interest expense, net
Pre-tax income
Income taxes
Net income
Balance Sheet
Assets
Cash and equivalents
Short-term investments
Accounts receivable, net
Inventories
Other current assets
Total current assets
Fixed assets (net)
Intangibles
Goodwill
Long-term investments
Other fixed assets
Total assets
Accounts payable
Accrued expenses
Short-term debt
Other current liabilities
Total current liabilities
Long-term debt
Other liabilities
2012
2013
2014
2015
6.860
2.862
3.998
6.945
2.789
4.156
7.450
3.140
4.310
7.620
3.242
4.378
2.916
(9)
12
33
13
1.015
334
681
2.971
(10)
12
58
16
1.089
339
750
3.142
(9)
19
27
17
1.096
320
776
3.301
(11)
17
51
11
987
285
702
672
516
547
842
324
2.900
884
359
1.004
100
130
5.416
974
325
458
896
310
2.963
932
328
968
81
124
5.418
797
488
588
1.020
436
3.329
1.322
299
964
500
644
655
1.042
483
3.324
1.436
267
903
135
6.088
131
6.106
181
147
664
267
43
1.121
203
690
0
77
970
298
786
210
715
234
27
1.186
298
731
0
766
946
274
543
512
Total liabilities
Additional Fund Needed - Cumulative
(Surplus)
Shareholders' equity
Common Stock
Paid-in capital
Retained earnings
Treasury stock
Total Liabilities and Equity
1.764
1.633
2.054
2.215
0
0
0
0
3.653
198
1.624
4.042
(2.212)
3.785
95
1.752
4.647
(2.709)
4.034
115
1.979
5.257
(3.317)
3.891
(164)
2.117
5.787
(3.849)
6.088
6.106
5.416
5.418
The first step in computing FCF is to restate do a Pen
That means to break the BS down into Net operating
stakeholder claims.
Note that assets are treated as a negative (since they
and equity are treated as positive (since they represe
Total assets
Less non operating assets
Marketable securities (short term
Investment)
Operating liabilities
Accounts payable
Accruals
Short term debt
Other Current liabilities
Other non current liabilities
Net operating assets
Non operating assets
Book value of the firm
Additional Fund Needed - Cumulative
(Surplus)
Long term debt
Common stock
Paid In capital
Retained earnings
Accumulated other(treasury sock)
(5.416)
516
(5.418)
325
(6.088)
488
(6.106)
644
181
0
0
766
543
(3.411)
147
664
267
43
512
(3.460)
203
690
0
77
786
(3.844)
210
715
234
27
731
(3.545)
(516)
(325)
(488)
(644)
(3.927)
(3.785)
(4.332)
(4.189)
0
0
0
0
274
198
1.624
4.042
(2.212)
0
95
1.752
4.647
(2.709)
298
115
1.979
5.257
(3.317)
298
(164)
2.117
5.787
(3.849)
Stakeholder claims
Total
Changes
3.927
3.785
4.332
4.189
0
0
0
0
The next step is to compute changes by subtracting o
(2)
(670)
(18)
(191)
163
156
(34)
664
267
(723)
(31)
(49)
56
26
(267)
34
274
(384)
7
25
234
(50)
(55)
299
Non operating assets
191
(163)
(156)
Book value of the firm
142
(547)
143
0
(274)
(103)
128
605
(497)
(142)
0
298
20
227
610
(608)
547
0
0
(279)
138
530
(532)
(143)
(0)
0
0
Total assets
Less non operating assets
Marketable securities (short term
Investment)
Operating liabilities
Accounts payable
Accruals
Short term debt
Other Current liabilities
Other non current liabilities
Net operating assets
Additional Fund Needed
Long term debt
Common stock
Paid In capital
Retained earnings
Accumulated other(treasury sock)
Stakeholder claims
Total
Computation of FCF
The final step is to use those change numbers to com
Net Income
Add back interest expense
Less tax on Interest expense
NOPAT
(Additions to Net operating assets)
FCF
750
16
(6)
760
(49)
711
776
17
(7)
786
(384)
402
702
11
(4)
709
299
1.008
Additional Fund Needed (Surplus)
(Pay off for long term debt)
0
(274)
0
298
0
0
Additional common stock
isssued/(Shares repurchased)
Additional Paid in capital
(Dividends paid)
(Interest paid net off tax)
(Increase) in non-operating assets
Increase/(Decrease) in accumulated
other
Dispositions of FCF
Total
(103)
128
(145)
(10)
191
20
227
(166)
(10)
(163)
(279)
138
(172)
(7)
(156)
(497)
(711)
(608)
(402)
(532)
(1.008)
0
0
0
Positive means source of cash and negative represen
ed Financial Statements
uren Corp.
2016
2017
2018
2019
2020
2021
7.405
3.218
4.187
7.553
3.282
4.271
7.704
3.348
4.356
7.858
3.415
4.443
8.015
3.483
4.532
8.176
3.553
4.623
3.389
(11)
192
28
15
552
156
396
3.457
(11)
0
3.526
(11)
0
3.596
(11)
0
3.668
(11)
0
3.742
(11)
0
15
788
315
473
15
804
322
483
15
821
328
493
15
838
335
503
15
855
342
513
456
629
517
1.125
326
3.053
1.583
244
918
296
6.213
465
629
527
1.148
333
3.101
1.615
249
936
0
302
6.203
474
629
538
1.170
339
3.164
1.647
254
955
0
308
6.327
484
629
549
1.194
346
3.227
1.680
259
974
0
314
6.454
494
629
560
1.218
353
3.291
1.713
264
994
0
320
6.583
503
629
571
1.242
360
3.357
1.748
269
1.014
0
327
6.715
151
898
116
33
1.198
597
674
154
916
116
34
1.220
597
687
157
934
116
34
1.242
597
701
160
953
116
35
1.264
597
715
163
972
116
36
1.287
597
730
167
991
116
36
1.311
597
744
2.469
2.504
2.540
2.576
2.614
2.652
0
(350)
(576)
(810)
(1.053)
(1.305)
3.744
(180)
2.258
6.015
(4.349)
4.049
(180)
2.258
6.320
(4.349)
4.363
(180)
2.258
6.634
(4.349)
4.688
(180)
2.258
6.959
(4.349)
5.022
(180)
2.258
7.293
(4.349)
5.368
(180)
2.258
7.639
(4.349)
6.213
6.203
6.327
6.454
6.583
6.715
(6.583)
(6.715)
o restate do a Penman restatement of the Balance Sheet
nto Net operating assets, non-operating assets, and
gative (since they represent a use of cash), and liabilities
since they represent a source of cash).
(6.213)
629
(6.203)
629
(6.327)
629
(6.454)
629
629
629
151
898
116
33
674
(3.712)
154
916
116
34
687
(3.667)
157
934
116
34
701
(3.755)
160
953
116
35
715
(3.845)
163
972
116
36
730
(3.937)
167
991
116
36
744
(4.031)
(629)
(629)
(629)
(629)
(629)
(629)
(4.341)
(4.296)
(4.384)
(4.474)
(4.566)
(4.660)
(350)
597
(180)
2.258
6.320
(4.349)
(576)
597
(180)
2.258
6.634
(4.349)
(810)
597
(180)
2.258
6.959
(4.349)
(1.053)
597
(180)
2.258
7.293
(4.349)
(1.305)
597
(180)
2.258
7.639
(4.349)
0
597
(180)
2.258
6.015
(4.349)
4.341
4.296
4.384
4.474
4.566
4.660
0
0
0
0
0
0
s by subtracting out the balances from the previous year.
(107)
10
(124)
(127)
(129)
(132)
(15)
0
0
0
0
0
(59)
183
(118)
6
(57)
(167)
3
18
0
1
13
45
3
18
0
1
14
(88)
3
19
0
1
14
(90)
3
19
0
1
14
(92)
3
19
0
1
15
(94)
15
0
0
0
0
0
(152)
45
(88)
(90)
(92)
(94)
0
299
(16)
141
228
(500)
152
(350)
0
0
0
305
0
(45)
(226)
0
0
0
315
0
88
(234)
0
0
0
325
0
90
(243)
0
0
0
335
0
92
(251)
0
0
0
345
0
94
0
0
(0)
0
0
0
e numbers to compute FCF and the Disposition of FCF.
396
15
(6)
405
(167)
238
473
15
(6)
482
45
527
483
15
(6)
492
(88)
403
493
15
(6)
502
(90)
411
503
15
(6)
512
(92)
420
513
15
(6)
522
(94)
428
0
299
(350)
0
(226)
0
(234)
0
(243)
0
(251)
0
(16)
141
(168)
(9)
15
0
0
(168)
(9)
0
0
0
(168)
(9)
0
0
0
(168)
(9)
0
0
0
(168)
(9)
0
0
0
(168)
(9)
0
(500)
(238)
0
(527)
0
(403)
0
(411)
0
(420)
0
(428)
0
0
(0)
0
negative represents a disposition, or distribution of cash.
0
(0)
https://finance.yahoo.com/quote/RL?ltr=1
(Data has been taken from this site)
Calculation of WACC
Beta
Risk-free Rate
Market risk premium
Cost of Equity
Weight of Equity
0,62
0,02
0,08
0,0696
0,8827
Cost of debt
Weight of debt
Tax Rate
0,06144
Hence, WACC
0,03
0,1173 (Weights were based on book values, and shou
0,4 (We have assumed 40% tax all over)
0,0021107
0,06355
Calculation of Horizon Value
FCF 2021
Growth
FCF 2022
WACC
Growth
HV 2021
428,39
0,02 (We have assumed 2% growth all over)
436,957
0,06355
0,02
10033,6
Calculation of Value of the Firm
Year
FCF
PViF
2017
2018
2019
2020
2021
HV
527
403
411
420
428
10034
0,940
0,884
0,831
0,782
0,735
0,735
Total value of the firm
Less Debt
Value of Equity
No. of Shares
Value per Share
Market value per share
PVCF
495 M
357
342
328
315
7.373
9.210
(713)
8.497
48
176,40
111,92
M
M
M
M
book values, and should have been based on market values)
Case study questions:
Items to be included in spreadsheet:
(1 ) Include 5 years of historical balance sheets and income statements
(1a) All spreadsheet data should be easily read and easily navigated. It should all be on
one spreadsheet, so the reader need not travel back and forth between numerous
sources.
(1b) On spreadsheets, all cells should contain their formulas, so the reader can see what
items are included in a total.
(1c) All spreadsheet totals should add up.
(1d) Retained earning should reconcile from one year to the next. In other words:
beginning retained earnings plus net income minus dividends should equal ending
retained earnings.
(2) Project 5 years of future balance sheets and income statements
(2a) In your balance sheets, separate out operating cash from excess cash and cash
equivalents.
(2b) In your projected balance sheets, assume no change in excess cash.
(2c) Consider this report a first pass; and assume that there is no change in long term
debt obligations, notes payable, common stock. That will make your free cash flow
computation easier.
(2d) If you are projecting a change in deferred tax assets or deferred tax liabilities,
explain why you are projecting that change. (Remember that, in the long run, deferred
tax assets and deferred tax liabilities zero out, since they are all based upon timing
differences which will reverse.)
(2e) If you are projecting a change in non-operating assets explain why.
(2f) To make your projected liabilities and equity equal to your projected assets, include
a line item between your liability section and equity section called Flexible Financing.
Generally, this will represent cumulative additional funds needed AFN. And if it is
negative, it will generally indicate cumulative free cash flow. Use the Flexible financing
account as a balancing account.
(2g) Assume no change in Other Accumulated Comprehensive Income. This account
appears in the equity section of the balance sheet and represents the unrealized gain or
loss on marketable securities and foreign exchange. It is only a temporary account and
should zero out over time.
(3a) Compute free cash flow for all years.
(3b) Show the disposition of free cash flow in all years, both historical and projected.
Items to be included in final report.
Respond to each of these questions in the final report, repeating the question number
and question before responding.
(4a) In the historical period, were there any acquisitions? And if so, were they stock for
stock, assets for stock, etc.?
(4b) Did another firm acquire shares in your company in the historical period? And if
so, were they stock for stock, or assets for stock, etc.?
(4c) If the firm is growing, is its growth real, or is it merely growth through acquisition?
(5a) Justify your revenue projections and your gross margin assumptions.
(5b) Explain which costs are fixed and which costs are variable and which costs have a
fixed and variable component. If some of your costs are fixed, then there will be
economies of scale, and your profit margins should improve.
(5c) If the provision for income tax differs significantly from 40 percent, explain why the
difference.
(6) Analyze the firm in terms of Porters Five Forces: In other words outline to what
extent the firm’s growth and profitability might be limited by (i) the power of its
consumers, (ii) competition from rival producers, (iii) potential competition from new
entrants into its market, (iv) the power of its input suppliers, or (v) the existence of
substitute goods.
(7) If your firm is in the technology sector, explain the firm’s position in its industry. Is it
a market leader? And if so, is it a market leader based upon its technological advantage?
And what must the firm do to remain a leader in its industry?
(8) Are there any legal problems, or outstanding lawsuits pending, or lawsuits which
have recently been settled? Explain. And explain what impact that might have on future
results.
(9) Do a ratio analysis to compare your firm with 3 firms in its industry, but only report
key ratios, which may include PE ratio, ROE, ROA, net profit margin, gross profit
margin. A comparative Du Pont analysis might be helpful. But do not report other
ratios, unless there is a significant difference. If your company is trading at a
significantly higher PE ration than other firms in its industry, is there an opportunity to
make acquisitions on a stock for stock basis? Identify potential acquisition targets.
(9a) Ratio comparisons should be presented in tables which are self explanatory.
(9b) Ratio comparisons should not be presented in narrative form.
(10) If the firm is facing possible insolvency, explain. If there is a possibility of
insolvency, you may wish to compute break even point.
(11) If your Flexible Financing account has a large positive balance, indicating AFN,
outline your plan for how the company will arrange outside financing. Will it borrow on
a short term basis, issue long term debt, or sell additional shares? And do you estimate
any problem with arranging that necessary financing?
(12) If your Flexible Financing account has a large negative balance, indicating FCF, how
will you use that FCF? Will you begin to pay dividends? Buy back stock? Use the FCF for
acquisitions?
(13) Place a value on the stock of your firm and support your computation.
(13a) Any computations, such as valuation, should be done in the form of tables which
are easy to read. Use the same format as the valuation tables in PowerPoint lecture
slides. Tables should be self-explanatory. In other words, the reader should not be
forced to search the document for missing information. Tables should clearly state your
assumptions.
(13b) A separate table should be presented to compute Horizon value.
(13c) And a second table should be presented incorporating the FCF of years 1-5, along
with the Horizon value, to arrive at valuation.
(13d) Your valuation should approximate the current market value of the stock. If it does
not approximate the current market value of the stock, then you need to rework your
projected cash flows and Horizon values, in order to come up with a reasonable
valuation.
(14) If you quote any analyst or news source, show your sources. Do not plagiarize, as
plagiarism is a serious breach of the academic honor code.
Historical and Projected
FedEx C
Period (May. 31)
2014
Income Statement
Revenues
45,567
Operating Expenses:
Salaries and employee benefits
16,171
Purchased transportation
8,011
Rentals and landing fees
2,622
Depreciation and amortization
2,587
Fuel
4,557
Maintenance and repairs
1,862
Goodwill and other asset impairment charges
Retirement plans mark-to-market adjustment
15.00
Other
5,927
Total Operating Expense
Operating Income
41,752
3,815
Other Income (Expenses):
Interest expense
(160)
Interest income
18
Other, net
(15)
Other Income (Expenses):
(157)
Income Before Income Taxes
3,658
Provision For Income Taxes (Benefit)
1,334
Net Income
2324
Balance Sheet
Cash and cash equivalents
Receivables
2908
5,460
Spare parts, supplies and fuelp
463
Deferred income taxes
522
Prepaid expenses and other
330
Total current assets
9683
Property And Equipment, At Cost
Aircraft and related equipment
15,632
Package handling and ground support equipment
6,082
Information technology
5,097
Vehicles
5,514
Facilities and other
8,366
40,691
Less accumulated depreciation and amortization
21,141
Net property and equipment
19,550
Other Long-term Assets
Goodwill
2,790
Other assets
1,047
Total other long-term assets
3,837
Total Assets
Additional Funds Needed
33,070
0
Liabilities And Stockholder's Investment
Current Liabilities
Current portion of long-term debt
1
Accrued salaries and employee benefits
1,277
Accounts payable
1,971
Accrued expenses
2,063
Total current liabilities
5,312
Long-term Debt, Less Current Portion
4,736
Other Long-term liabilities
Deferred income taxes
2,114
Pension, postretirement healthcare and other benefit
obligations
3,484
Self-insurance accruals
1,038
Deferred lease obligations
758
Deferred gains, principally related to aircraft
transactions
206
Other liabilities
145
Total other long-term liabilities
Total liabilities
7,745
17,793
Commitments And Contingencies
Common Stockholder's Investment
Common stock
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Treasury stock, at cost
Total Equity(Total common stockholders' investment)
Total Liabilities and Equity
Total Assets
Less non operating assets
Marketable Securities (short-term investment)
Operating Liabilities
Accounts Payable
Accruals
Short-term Debt
Other Current Liabilities
Other non Current Liabilities
Net Operating Assets
Net Income
Add Back Interest Expenses
Tax Rate
Less Tax on Interest Expense
NOPAT
(Additions to net oprating assets)
FCF
32
2,643
16,229
506
(4,133)
15,277
33070
2014
-33070
1971
2063
145
-28891
2324
160
35.0%
(56)
2428
2014
Begin RE
Add Net Income
Employee incentive plans and other
Less Dividend Paid
End RE
2324
16229
Projected Financial Statements
FedEx Corp.
2015
47,453
2016
50,365
2017
60,319
2018
2019
2020
2021
Growth Rate:
9.47%
10.85%
12.06%
65,450
GR:
71,648
9.75%
79,422
9.89%
89,000
11.49%
17,110
18,581
21,542
23,207
25,470
27,989
31,205
8,483
9,966
13,630
15,101
16,573
18,212
20,305
2,682
2,854
3,240
3,361
3,689
4,054
4,519
2,611
2,631
2,995
3,095
3,397
3,733
4,162
3,720
2,399
2,773
3,374
3,703
4,069
4,537
2,099
2,108
2,374
2,622
2,878
3,162
3,526
-
380
417
458
511
(24)
(10)
(11)
(12)
(13)
276
-
2,190
1,498
6,415
7,251
8,752
9,450
10,371
11,397
12,707
45,586
47,288
55,282
60,580
66,487
73,062
81,457
1,867
3,077
5,037
4,870
5,162
6,360
7,543
(235)
(336)
(512)
(558)
(558)
(558)
(558)
14
21
33
48
48
48
48
(19)
(22)
21
(7)
(7)
(7)
(7)
(240)
(337)
(458)
(517)
(517)
(517)
(517)
1,627
2,740
4,579
4,353
4,645
5,843
7,026
577
920
1,582
(219)
1,626
2,045
2,459
1050
1820
2997
4572
3019
3798
4567
3763
3534
3969
3265
3,574
3,962
4,440
5,719
7,252
7,599
8,481
9,284
10,291
11,533
498
496
514
525
575
637
714
355
707
546
1,070
1,171
1,298
1,455
10941
11989
12628
13341
14604
16189
18141
606
16,186
17,499
18,833
20,749
22,714
25,178
28,215
6,725
7,961
8,989
9,727
10,648
11,803
13,227
5,208
5,149
5,396
5,794
6,343
7,031
7,879
5,816
6,422
6,961
7,708
8,438
9,353
10,481
8,929
9,987
10,447
11,143
12,198
13,522
15,152
42,864
47,018
50,626
55,121
60,341
66,888
74,955
21,989
22,734
24,645
26,967
29,521
32,724
36,670
20,875
24,284
25,981
28,154
30,820
34,164
38,284
3,810
6,747
7,154
6,973
7,633
8,462
9,482
1,443
2,939
2,789
3,862
4,228
4,686
5,252
5,253
9,686
9,943
10,835
11,861
13,148
14,734
37,069
45,959
48,552
52,330
57,286
63,501
71,159
0
0
0
0
972
2,032
3,316
19
29
22
1,342
1,342
1,342
1,342
1,436
1,972
1,914
2,177
2,383
2,642
2,960
2,066
2,944
2,752
2,977
3,259
3,613
4,048
2,436
3,063
3,230
3,131
3,428
3,799
4,258
5,957
8,008
7,918
9,627
10,412
11,396
12,608
7,249
13,733
14,909
15,243
15,243
15,243
15,243
1,747
1,567
2,485
2,867
3,139
3,479
3,899
4,893
6,227
4,487
2,187
2,394
2,654
2,974
1,120
1,314
1,494
1,784
1,953
2,165
2,426
711
400
531
551
603
669
749
181
155
137
121
132
147
165
218
771
518
534
585
648
726
8,870
10,434
9,652
8,044
8,806
9,761
10,938
22,076
32,175
32,479
32,914
34,460
36,400
38,790
32
32
32
32
32
32
32
2,786
2,892
3,005
3,117
3,117
3,117
3,117
16,900
18,371
20,833
24,823
27,260
30,476
34,461
172
(4,897)
14,993
(169)
(415)
(578)
(578)
(578)
(578)
(7,342)
(7,382)
(7,978)
(7,978)
(7,978)
(7,978)
13,784
16,073
19,416
37069
45959
48552
52330
2015
-37069
2016
-45959
2017
-48552
2018
-52330
2066
2436
2944
3063
2752
3230
2977
3131
218
-32349
771
-39181
518
-42052
534
-45688
1050
235
35.0%
(82)
1203
6832
8035
1820
336
35.0%
(118)
2038
2871
4909
2997
512
35.0%
(179)
3330
3636
6966
4572
558
35.0%
(195)
4935
-45688
-40753
2015
2016
2017
2018
21,853
25,069
29,054
56313
61469
67843
2019
2020
2021
16,229 16,900 18,371 20,833 24823 27260 30476
1050
1820
2997
4572
3019
3798
4567
(152)
(72)
(109)
(47)
(47)
(47)
(47)
(227)
(277)
(426)
(535) (535) (535) (535)
16900 18371 20833 24823 27260 30476 34461
2022
2023
10.21%
10.64%
98,087
108,524
10.18%
10.33%
34,381
37,933
22,372
24,683
4,979
5,494
4,585
5,059
4,999
5,515
3,884
4,286
563
621
(15)
(16)
14,000
15,446
89,749
99,020
8,338
9,503
(558)
(558)
48
48
(7)
(7)
(517)
(517)
7,821
8,986
2,737
5084
Taxes Rate
3,145
35%
5841
4,893
5,414
12,710
14,062
787
871
1,604
1,774
19994
22121
31,096
34,404
14,577
16,128
8,683
9,607
11,552
12,781
16,700
18,476
82,608
91,397
40,414
44,714
42,193
46,683
10,450
11,562
5,788
6,404
16,238
17,966
78,425
86,769
3,813
4,294
1,342
1,342
3,263
3,610
4,462
4,936
4,692
5,192
13,758
15,079
15,243
15,243
4,297
4,754
3,278
3,626
2,674
2,958
826
914
181
201
800
885
12,055
13,338
41,057
43,660
32
32
3,117
3,117
38,963
44,222
(578)
(578)
(7,978)
(7,978)
33,556
38,815
74612
82475
2022
2023
34461 38963
5084
5841
(47)
(47)
(535) (535)
38963 44222
Purchase answer to see full
attachment