Case Analysis: Teuer Furniture Harvard Case Solution & Analysis

Case Analysis: Teuer Furniture Case Solution

Forecasted Income Statement

 However, these parameters were provided in the case and by using these forecasting rates, income statement has been achieved. Moreover, all the parameters were appropriate to fit in the forecasted statement of operations. On the other hand, the value of depreciation expense is taken as same in the first year, this value has been taken until the fifth year as per given parameter. Also, the value of sales was taken as same in 2012 since the forecasting rate was not given for 2012. Finally, the last assumption includes that leasing expenses have made the same for every forecasted year.

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In the first forecasted year, the sales were 148,218, which was same as 2012. However, sales followed a trend of growth and became 252,267 in the second forecasted year and turned into 474,683 in the last projected year. Furthermore, it can be seen that the company faced a loss for the first and second projected years, and later on this loss was converted into profits and became 20,413 in the expected third year and finally it became 92,667 in the last projected year.

Projected Balance Sheet

(Appendix 2) Projected or forecasted balance sheet has also been made on the given parameters and afterwards, the items of stock were calculated separately. Also, all the parameters were given for the balance sheet however Property, Plant and Equipment’s (PPE) projection criteria werenot given. Therefore, the analyst took the variance of the last two years and forecasted the PPE for the future. Moreover, the rate which the investigator applied on PPE was approximately 25%. Afterwards, depreciation was subtracted from initial five years and the perfect balance of PPE was taken in the last two years of projections. Finally, all the other things were calculated as per the given parameters without any assumptions.

Apart from that, it can be seen that the assets were 85,463 in 2012 and afterwards, they became 101,494 in the next year and turned into 238,298 in the last forecasted year. However, the total current liabilities were 13,046 in 2012, 18,502 in 2013 and, later on, they became32,831 in the final projected year. As far as equity is the concerned, it can beseen that the equity was 72,417, 82,982 and 205,467 in 2012, 2013 and 2018 respectively. However, there is no debt present in the capital structure.

Estimated Cash Flows from Assets and Discounted Cash Flows (DCF) Valuation

(Appendix 3) The cash flows from assets were calculated and forecasted as per the given estimations, all the evaluations were appropriate to estimate the cash flows from assets but there was a problem with the capital expenditure. In order to solve this issue, the analyst took the average variance of all the capital costs present in the previous balance sheet. The reason for taking the average of these differences was that these variances were showing negative and positive values. Moreover, this average showed a positive rate of 54%, which was further used in estimating the Capital Expenditures (CAPEX).........................

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