Two-Year-Ahead Forecasting of Financial Statement Following are the financial st

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Two-Year-Ahead Forecasting of Financial Statement
Following are the financial statements of Target Corporation from its FY2015 annual report.

We forecast Target's income statement using the following forecast assumptions for both years:

Instructions: Forecast Target's fiscal year ended 2016 and 2017 income statements.

Use the same forecasting assumptions for both years.

Round forecasts to $ millions.

Use rounded figures for subsequent forecast calculations.

Do not use negative signs with your answers in the income statement.

Hint: Forecasted FY2016 gain on sale is computed as proceeds from the disposal of nets assets from discontinued operations minus net assets from discontinued operations ($350 million - $226 million). Forecast $0 gain on sale in FY2017.

We forecast Target's financials using the following forecast assumptions for both year:

Assume Target buys back common stock at $2,000 million in FY2016 and retires the stock.

(Hint: Retained earnings are reduced by the cost of the stock buy back.) No stock buybacks happen in FY2017.

Instructions: Forecast Target's fiscal year ended 2016 and 2017 balance sheets.

Use the same forecasting assumptions for both years.

Round forecasts to $ millions.

Use rounded figures for subsequent forecast calculations.

Do not use negative signs with your answers in the income statement.

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Refine Assumptions for Dividend and Retained Earnings Forecast
Provided below is FY2016 information for Medtronic PLC.

a. Use the financial statements along with the additional information below to forecast retained earnings for FY2017.

Forecasted retained earnings $Answer million

b. Suppose the MD&A section of the Form 10-K and additional guidance from the company reveals the following additional information.

At FY2016 year-end (April 29, 2016), the company had approximately 1,400 million shares issued and outstanding. Use this information to refine your forecast of retained earnings for FY2017.

Forecasted retained earnings $Answer million

Target Corporation Consolidated Statements of Operations 12 Months Ended $millions Jan. 30, 2016 Jan. 31, 2015 Feb. 01, 2014 Sales 75,785 72,618 71,279 Cost of sales 53,428 51,278 50,039 Gross margin 22,357 21,340 21,240 Selling, general and administrative expenses 15,081 14,676 14,465 Depreciation and amortization 2,213 2,129 1,996 Gain on sale (620) - (319) Earnings from continuing operations before interest expense & income taxes 5,683 4,535 5,170 Net interest expense 607 882 1,049 Earnings from continuing operations before income taxes 5,076 3,653 4,121 Provision for income taxes 1,650 1,204 1,427 Net earnings from continuing operations 3,426 2,449 2,694 Discontinued operations, net of tax 42 (4,085) (723) Net earnings (loss) 3,468 (1,636) 1,971

Explanation / Answer

Target Corporation Consolidated Statements of Operations $ millions forecast assumptions FY2016 Est. FY2017 Est. Sales 6% $80,332 $85,152 Cost of sales 70.50% 56634 60032 Gross margin 23698 25120 Selling, general and administrative expenses 19.90% 15986 16945 Depreciation and amortization 8.40% 6748 7153 Gain on sale 109 0 Earnings from continuing operations before interest and tax 1073 1022 Net interest expense No change 607 607 Earnings from continuing operations before tax 466 415 Provisions for income taxes 32.50% 15 13 Net earnings $466 $415

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