Using either 1 or 2 approach 1 forecast the next two years

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Reference no: EM13610152

Using either 1) or 2) approach: 1., forecast the next two years by using the three-year average rate of growth in sales of the last three years
Increase all items in the Income Statement by that percentage, including depreciation.

Make the Balance Sheet balance by increasing cash in the next two years by the amount of net income for each year and increasing Retained Earnings for the amount of net income for each year.

2. Forecast the next two years by using some other percentage, such as 5%. In practice, the choice of percentage to use will be a committee decision. The assignment is to focus on what to do with the assumed percentage increase, not how to get it. Also in practice, some items on the Income Statement will not increase with sales-this will vary from company to company. Depreciation may remain constant for example.
then multiply the forcasted earnings per share amount by a recent price-earnings multiple as reported by Yahoo Finance for the company. Do this to forcast the future stock price.

Reference no: EM13610152

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