Chapter 9

1. Exhibit 9.14 presents the income statement and balance sheet for PartsCo, a$900 million supplier of machinery parts. Next year, the company is expectedto grow revenues by 15 percent to $1,035 million. Using the methodologyoutlined in Exhibit 9.3, forecast next year's income statement for PartsCo.Assume next year's forecast ratios are identical to this year's ratios. Forecastdepreciation as a percentage of last year's property and equipment. Forecastinterest as a percentage of last year's total debt.

2. Using the methodology outlined in Exhibit 9.10, forecast the operating itemson next year's balance sheet for PartsCo. Forecast each balance sheet item asa function of revenue, except inventory and accounts payable, which shouldbe forecast as a function of cost of sales. Yourforecast should be consistentwith the revenue and cost of sales forecast in Question 2.

Chapter 10

1. Exhibit 10.13 presents free cash ?ow and economic pro?t forecasts for ApparelCo, a $250 million company that produces men's clothing.ApparelCo is expected to grow revenues, operating pro?ts, and free cash?ow at 6 percent per year inde?nitely. The company earns a return on new capital of 15 percent. The company's cost of capital is 10 percent. Using the key value driver formula, what is the continuing value as of year 5? Using discounted cash ?ow, what is the value of operations for ApparelCo?What percentage of ApparelCo's total value is attributable to the continuingvalue?