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Convert WRDS OUTPUT Building a Financial Statement Analysis and Valuation Spreadsheet Income Statement-66 This case starts with raw financial statements and then a) develops standardized financial statements, b) constructs a statement of cash flows, c) builds all the key ratios, d) links forecast inputs to future financial statements, and e) builds discounted cash flow and residual income valuation models based on the forecasts. The result is a simplified version of eVal4, the spreadsheet model that is provided with “Equity Valuation and Analysis” by Russell Lundholm and Richard Sloan, but one that you should completely understand (because you built it yourself!). To save you some time, many of the cells are completed; you only need to…show more content…
Your task is to figure out these future financial statement values and create links from the Forecasting sheet to the Financial Statements sheet. 3) You will note that the ratios on the Forecasting sheet are defined in terms of ending balance sheet amounts, whereas the ratios on the Ratio Analysis sheet are defined in terms of average balance sheet amounts. To see why this it, construct a temporary line on the Forecasting sheet to input the ratio of Sales to Average Receivables and then compute the resulting ending Receivables forecasts. To illustrate this point, input 15% as the ratio of Ending Receivables to Sales and then add a temporary line where the Average Receivables to Sales is 15%. For each, compute the implied ending balance of Receivables each year, and then plot the two resulting series. Notice anything funny about the implied balance when the average receivables are used as the basis for forecasting? Part E: Valuation 1) Compute the value of General Mills as of July 1, 2008 using the discounted cash flow model. Do so by linking to the statement of cash flow data, or directly to the financial statement data. Set the cost of equity capital, debt capital and the weighted average cost of capital at 10%, 8% and 8.96%, respectively, as given on the spreadsheet. 2) Compute the value of General Mills as July 1, 2008 using the residual income model. Do so by linking to the