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 764564556.xlsx

Financial Modeling Exam

Core I Modeling Exam Solution

x Subject Company

Analyst Name Your name here

SEE NEXT PAGE FOR INSTRUCTIONS

x Subject Company

Ticker: STWCO
Company name: Steelwork Co. <== cell is named "name"
Sub-header #1: Dollars in millions, except per share <== cell is named "Subheader"
Sub-header #2: Dollars in millions <== cell is named "Subheader2"
Fiscal Year End: 31-Dec <== cell is named "FYE"
Number of days in a year 365 <== cell is named "Days"

x Color Codes

Input Blue cells are for data input.

Reference Green cells are links to different worksheets.
Formula Black cells are formulas.
Warning Red cells are "warnings". Something unique has been done in the cell and red formatting brings attention to i

x END

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rmatting brings attention to it.

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 764564556.xlsx

Financial Modeling Exam

Core I Modeling Exam Solution

x Exam Instructions

x Test procedures
Rename this file as follows: lastname_firstname.xls
Type your name in the space provided on the 'overview' sheet of this model.
You may NOT consult with any other class member. If you have questions, ask an instructor or teaching assistant.
Save your model with iterations turned on and the circular toggle active.

x Complete the model.

Complete the sub-totals for the historic IS and BS data. For year 20X2, earnings after tax should be $133.2.
Project the income statement, balance sheet, and cash flow statement for 5 years.
Complete the 'owc', 'dep', 'equity', and 'debt' supporting schedules. The 'amort' and 'other' supporting schedules have b
Save your model with iterations on and the circular toggle active.
Complete the sensitivity tables beginning on row 39 of the 'is' sheet.
Formatting (e.g. number formatting, borders, number coloring) will NOT be graded in this exam.

x Check your work. Make sure your model meets these criteria.
Balance sheet balances.
You have NO unnecessary circular references.
You have NO hard-number assumptions in output formulas.
Your model is accurate, flexible, and user-friendly.

x END

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 764564556.xlsx

r teaching assistant.

ld be $133.2.

porting schedules have been pre-completed.

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 764564556.xlsx

Income Statement for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Sales $6,119.4 $6,119.4 $6,119.4

Cost of sales 2,944.3 3,071.8 3,127.9
x Gross profit

SG&A expenses (excludes dep. and amort.) 2,403.4 2,492.7 2,635.0

x EBITDA

Depreciation 178.1 182.9 192.2

Amortization 5.8 6.1 5.4
x EBIT

Interest expense 12.8 8.3 14.7

Interest (income) (19.2) (21.6) (30.6)
Other non-operating (income) / expense 1.9 1.9 1.6
x Pretax income

Income taxes 125.0 75.0 40.0

x Normalized net income

x Diluted weighted average shares (in millions) 197.045 196.074 193.976

x Normalized diluted earnings per share

Ratios & assumptions

Sales growth rate
Gross margin
SG&A expenses (as a % of sales)
EBIT Margin
Other non-operating (income) / expense ($ amount) $1.9 $1.9 $1.6
Effective tax rate
Diluted weighted average shares (in millions) 197.045 196.074 193.976

x Sensitivity Analysis

"One-way, vertical table"

20X3 EPS Sensitivity Tables
x
$0.00
44.0% Steps to complete the one-way data table
44.5% 1) Link the red ''Output Cell'' in cell E44 to the cell you want to ''study''
45.0% 2) Highlight the range D44:E53
20X3 45.5% 3) Select Data Table (Alt A W T)
Gross Margin 46.0% 4) Skip the row input cell. Leave it blank. For the column input cell sel
46.5% 5) Press ENTER then F9 to calculate
47.0% 6) Stress test your data!
47.5%

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 764564556.xlsx

48.0%

0.5% Step function

"Two-way table"
Steelwork Co. 20X2 - 20X7 EPS CAGR Sensitivity Table
x
20X4 Sales Growth Rate
xxxx 1.0% 2.0% 3.0% 4.0% 5.0% 6.0%
44.0%
44.5%
45.0%
20X3 45.5%
Gross Margin 46.0%
46.5%
47.0%
47.5%
48.0%

0.5% Step function

6.0% conditional formatting cell
Conditional formatting: (Alt H L N)

x END

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 764564556.xlsx

Projected Year Ending December 31, 20X2 - 20X7

20X3 20X4 20X5 20X6 20X7 CAGR

xxxx

xxxx

xxxx

xxxx

xxxx

xxxx

190.000 187.000 183.000 181.000 179.000

xxxx

Step
3.5% flat line w/step 0.0%
48.0% flat line w/step 0.3%
41.0% flat line w/step (0.3%)

$2.0 $2.0 $2.0 $2.0 $2.0

21.0% flat line
190.000 187.000 183.000 181.000 179.000

o the cell you want to ''study'' K28

For the column input cell select K32

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 764564556.xlsx

Step function
7.0% 1.0%

Steps to complete the two-way data table

1) Link the ''Output Cell'' D61 to the cell you want to ''study'' Q28
2) Highlight the range D61:K70
3) Select Data Table (Alt A W T)
4) Row input cell select L31. Column input cell select K32
5) Press ENTER then F9 to calculate
6) Stress test your data!

For training purposes only!

 764564556.xlsx

Balance Sheet for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Cash $794.4 $823.4 $829.0

Accounts receivable, net 1,068.5 1,089.1 1,102.9
Inventories 957.6 938.7 1,008.5
Other current assets 148.2 109.5 157.2
Total current assets

x PP&E, net 787.1 858.3 823.4

Definite life intangibles 15.3 10.5 7.4
Indefinite life intangibles 225.2 227.6 229.2
Goodwill 128.0 128.0 128.0
Other long-term assets 228.7 234.4 299.7
Total assets

x Accounts payable $476.7 $483.8 $528.9

Other current liabilities 581.5 523.5 615.3
Total current liabilities

x Revolver 17.4 6.4 0.0

Long-term debt 157.0 161.2 168.2
Deferred income taxes 10.3 8.8 11.1
Other long-term liabilities 39.8 45.1 41.2
Total liabilities

x Total stockholder's equity 3,070.3 3,190.7 3,220.8

Total liabilities and equity

x Parity check (A = L+E) 0.000 0.000 0.000

x END

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Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

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 764564556.xlsx

Projected Cash Flow for Steelwork Co.

Dollars in millions, except per share

Operating activities
Net income
Depreciation
Amortization
(Increase) / decrease in operating working capital
Change in other long-term assets and liabilities
x Cash flow from operating activities

Investing activities
Capital expenditures
Additions to definite life intangibles
x Cash flow from investing activities

Financing activities
Issuance / (repayment) of revolver
Issuance of long-term debt
(Repayment) of long-term debt
Share issuance / (repurchase)
Dividends
x Cash flow from financing activities

Net change in cash

Beginning cash balance
x Ending cash balance

x Cash flow available for financing activities

x END

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Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

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 764564556.xlsx

Operating Working Capital Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

Sales
Cost of goods sold

Operating working capital balances

x Accounts receivable, net
Inventories
Other current assets
Total non-cash current assets

x Accounts payable
Other current liabilities
Total non-debt current liabilities

Operating working capital / (deficit)

x (Increase) / decrease in operating working capital

Ratios and assumptions

x Accounts receivable, net (collection period in days)
Inventories (days outstanding)
Other current assets (as % of sales)

Accounts payable (days outstanding)

Other current liabilities (as % of cost of sales)

x END

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 764564556.xlsx

Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

Step function
55.0 flat line w/step 0.0
103.0 flat line w/step (1.0)
2.0% flat line

55.0 flat line w/step (1.0)

17.0% flat line

For training purposes only!

 764564556.xlsx

Depreciation Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Sales

x Beginning PP&E, net

Capital expenditures DO NOT BACK RECONCILE
(Depreciation expense)
Ending PP&E, net

x Ratios and assumptions

Capital expenditures $220.0 $245.0 $226.0
Capital expenditures as % of sales
Depreciation expense
Depreciation as % of capex
Depreciation as % of PP&E, net

x END

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 764564556.xlsx

Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

Step function
3.0% flat line w/step 0.0%

95.0% flat line w/step 0.5%

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 764564556.xlsx

Amortization Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Sales $6,119.4 $6,119.4 $6,119.4

Beginning definite life intangibles, net

Additions to definite life intangibles DO NOT BACK RECONCILE
(Amortization expense)
Ending definite life intangibles, net $15.3 $10.5 $7.4

x Ratios and assumptions

Additions to definite life intangibles $5.0 $7.0 $5.0
Additions as % of sales 0.1% 0.1% 0.1%
Amortization expense $5.8 $6.1 $5.4
Amortization as % of definite life intangibles, net 37.8% 57.8% 73.1%

x END

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Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

$0.0 $0.0 $0.0 $0.0 $0.0

$7.4 $7.4 $8.4 $9.9 $10.9

5.0 5.0 5.0 5.0 5.0
(5.0) (4.0) (3.5) (4.0) (3.5)
$7.4 $8.4 $9.9 $10.9 $12.4

Step function
$5.0 $5.0 $5.0 $5.0 $5.0 $0.0
#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
$5.0 $4.0 $3.5 $4.0 $3.5
67.2% 47.4% 35.2% 36.6% 28.1%

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 764564556.xlsx

Other Long-Term Items Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Other Long-Term Assets

Indefinite life intangibles $225.2 $227.6 $229.2
Goodwill 128.0 128.0 128.0
Other long-term assets 228.7 234.4 299.7
Total other long-term assets $582.0 $590.0 $656.9
(Increase) / decrease in long-term other assets (8.1) (66.9)

x Other Long-Term Liabilities

Deferred income taxes 10.3 8.8 11.1
Other long-term liabilities 39.8 45.1 41.2
Total other long-term liabilities $50.1 $54.0 $52.3
Increase / (decrease) in other long-term liabilities 3.9 (1.7)

Change in other long-term assets and liabilities ($4.2) ($68.6)

x END

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Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

$229.2 $229.2 $229.2 $229.2 $229.2

128.0 128.0 128.0 128.0 128.0
299.7 299.7 299.7 299.7 299.7
$656.9 $656.9 $656.9 $656.9 $656.9
0.0 0.0 0.0 0.0 0.0

11.1 11.1 11.1 11.1 11.1

41.2 41.2 41.2 41.2 41.2
$52.3 $52.3 $52.3 $52.3 $52.3
0.0 0.0 0.0 0.0 0.0

$0.0 $0.0 $0.0 $0.0 $0.0

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 764564556.xlsx

Shareholders' Equity Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31, Projected Year Ending December 31,
20X0 20X1 20X2 20X3 20X4 20X5 20X6 20X7

x Beginning equity balance

Net income DO NOT BACK RECONCILE
Share issuance / (repurchase)
Dividends
x Ending equity balance

x Ratios and assumptions

Dividends $200.0 $246.4 $234.5
Net income Step function
Dividend payout ratio 25.0% flat line w/step 0.0%
Share issuance / (repurchases) ($143.4) ($157.6) ($162.4) ($165.0) flat line w/step ($2.5)

x END

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Debt and Interest Schedule for Steelwork Co.

Dollars in millions, except per share

Historical Year Ending December 31,

20X0 20X1 20X2

x Cash flow available for financing activities

Share issuance / (repurchase)
Dividends
Plus: beginning cash balance
Less: minimum cash balance DO NOT BACK RECONCILE
x Cash available for debt repayment
Long-term debt issuance
Long-term debt (repayment)
x Cash available for revolver

Revolver
Beginning balance
Issuance / (repayment) of revolver
x Ending balance

Long-term debt
Beginning balance
Issuance
(Repayment)
x Ending balance

Revolver Average balances

Interest rate
x Interest expense

Long-term debt Average balances

Interest rate
x Interest expense

x Total interest expense

Cash Average balances

Interest rate
x Interest (income)

x Ratios and assumptions

Minimum cash balance
Long-term debt issuance
Long-term debt repayment
Interest rate on revolver
Interest rate on long-term debt
Interest rate on cash

x END

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Projected Year Ending December 31,

20X3 20X4 20X5 20X6 20X7

$800.0 $800.0 $800.0 $800.0 $800.0

0.0 0.0 0.0 0.0 0.0
80.0 75.0 0.0 10.0 0.0
3.00% 3.00% 3.00% 3.00% 3.00%
7.00% 7.00% 7.00% 7.00% 7.00%
1.95% 1.95% 1.95% 1.95% 1.95%

For training purposes only!