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We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales,*((1-c-d)(1-p)-s/(1+s)*n).

We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales,*((1-c-d)(1-p)-s/(1+s)*n).

MATLAB: An Introduction with Applications
MATLAB: An Introduction with Applications
6th Edition
ISBN:9781119256830
Author:Amos Gilat
Publisher:Amos Gilat
Chapter1: Starting With Matlab
Section: Chapter Questions
Problem 1P
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We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales. *((1-c-d)(1-p)-s/(1+s)*n).
Transcribed Image Text:We want to understand the relationship between sales growth rates (s) and project FCF growth rates (g). This is useful to think about, because in our spreadsheet models we often need an estimate of g but when we look for analyst forecasts, they often just apply to s. We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC, and CAPEX occurring each year. You know that sales growth is constant and equals s. You further know that in any given year, COGS/Sales-c, the tax rate is p, the ratio of ONWC to Sales is n, and CAPEX-Depreciation, and Depreciation/Sales-d. s, c, p, n, and d are constants (i.e., fixed parameters that don't change over time). Perform an algebraic series of calculations. Start with FCF = (Sales - COGS - DA - Taxes - etc). Simplify the expression until it is in the form Sales. *((1-c-d)(1-p)-s/(1+s)*n).
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