ACCT6003 Fundamental Analysis for Equity Investment
Week 11 Assignment on Growth and Forecasting
Marks: 6/100
Deadline for submission: Before the lecture of Week 12. The answer to the Week 10 assignment provides an Excel spreadsheet with reformulated statements for Woolworths during 2012-2017, a detailed financial ratio analysis of profitability and an analysis of revenue growth by segment for the same period. Assume that you are an analyst following Woolworths. You are at year-end 2017 and you must produce pro-forma statements for 2018 that could be used as an input in the ReOI valuation model. Given all this rich information and the discussions that we have had in the lectures and workshops of weeks 9, 10 and 11, you are required to complete the following tasks: a) In the worksheet named ‘Projected revenue’, detail your approach in forecasting Woolworth’s revenue for 2018. [2 marks] b) In the worksheet named ‘Pro-forma IS’, detail your approach in generating Woolworth’s 2018 pro-forma income statement up to operating income after tax (OI). [2 marks] c) In the worksheet named ‘Projected RNOA’, detail your approach in forecasting Woolworth’s RNOA for 2018. [2 marks] You are provided with an Excel template containing the Week 10 answer plus three additional worksheets where you are required to detail your approach and document all calculations, assumptions, and estimation choices for completing the above tasks using notes. The notes must explain and justify your approach when making the above projections using evidence. We expect to see several notes documenting and justifying every choice you make. You are only required to submit this completed Excel spreadsheet for marking. Note that we will not mark your answer relative to its closeness to the actual 2018 financials. Do not look at the annual reports from 2018 onward. We do not care about the accuracy of your forecast and whether it would be close to what was actually reported in 2018. Your
answer will be marked on the following criteria: (i) applying attained knowledge from ACCT6003 lectures and workshops, (ii) using available evidence from the analysis presented in the Excel spreadsheet, (iii) discovering relevant qualitative evidence from Woolworths and its environment that can help with prospective analysis, (iv) developing convincing arguments that justify the use of assumptions and choices when projecting ratios and developing pro-forma statements.