Swann Systems is forecasting the following income statemen
Question # 00319528
Posted By:
Updated on: 06/20/2016 11:18 AM Due on: 06/28/2016
Question 2
Swann Systems is forecasting the following income statement for the upcoming year:Sales $5,000,000Operating costs (excluding depreciation) $3,000,000Gross margin $2,000,000Depreciation $500,000EBIT $1,500,000Interest $500,000EBT $1,000,000Taxes (40%) 400,000Net income $ 600,000The company's president is disappointed with the forecast and would like to see Swann generate higher sales and a forecasted net income of $2,000,000. Assume that operating costs (excluding depreciation) are always 60 percent of sales. Also, assume that depreciation, interest expense, and the company's tax rate, which is 40 percent, will remain the same even if sales change. What level of sales would Swann have to obtain to generate $2,000,000 in net income?Show your calculations. (10 points)
Question 3(15 points)Please review the two PPT packages below, and then prepare an essay (or memo) that includes the following elements. Limit to 2-4 pages (including charts / tables / references where applicable).
Swann Systems is forecasting the following income statement for the upcoming year:Sales $5,000,000Operating costs (excluding depreciation) $3,000,000Gross margin $2,000,000Depreciation $500,000EBIT $1,500,000Interest $500,000EBT $1,000,000Taxes (40%) 400,000Net income $ 600,000The company's president is disappointed with the forecast and would like to see Swann generate higher sales and a forecasted net income of $2,000,000. Assume that operating costs (excluding depreciation) are always 60 percent of sales. Also, assume that depreciation, interest expense, and the company's tax rate, which is 40 percent, will remain the same even if sales change. What level of sales would Swann have to obtain to generate $2,000,000 in net income?Show your calculations. (10 points)
Question 3(15 points)Please review the two PPT packages below, and then prepare an essay (or memo) that includes the following elements. Limit to 2-4 pages (including charts / tables / references where applicable).
- What is the key theme of the two PPT slides?
- What are the key findings? Please summarize and elaborate.
- What are the major lessons learned from Credit Analysis & Underwriting perspectives?
- What are the hallmarks of good quality of earnings? What are the signs of bad quality of earnings? Please elaborate.
- If applicable, please use examples from your work to add more colors / perspectives.
Question 4(25 points) Sources:http://stellar.mit.edu/S/course/15/fa07/15.535/Please review the two Corporate valuation Reports prepared by graduate students from MIT School of Management.Please pick one report and conduct an in-depth assessmentand analysis of the quality of the work being done. Prepare an essay that includes the following elements. Limit to 2-4 pages (including charts / tables / references where applicable).Your role is a credit approver or reviewer. - What are the key facts and findings? Please summarize and elaborate.
- Key section: A critical assessment. From Credit Analysis & Underwriting perspectives, what are the strengths and the weaknesses of the Business Valuation report? For examples:
- Which sections are weak and need to improve / enhance? Which sections are and well- articulated and well supported?
- Is the industry analysis section sufficient in light of Michael Porter's competitive strategy framework?
- Is the analysis on financial leverage adequate / sufficient or show areas of lacking?
- Is the DCF model using realistic assumptions?
- Does the cost of capital estimate make sense to you?
- Do you agree the recommendation made by the research team? Why and why not?
- Overall assessment and concluding remarks.
-
Rating:
/5
Solution: Swann Systems is forecasting the following income statemen