Question1 Forecasting EBIT (9 marks | Word limit: 200 words)

LO3: Assess the impact of key quantitative and qualitative data on industrial equity stocks.

LO5: Construct a basic financial model of a company.

This question requires you to build P&L sections of a financial model, using the Excel template provided (‘No Acquisition’ worksheet).

(a) Derive sales forecasts for The Reject Shop for the next two (2) years.

The sales forecast module of the model is provided in the ‘Store analysis’ section of the spreadsheet. You are required to provide assumptions for new store growth and also the expected increase or decrease in sales in order to forecast sales figures for the next two years. (4 marks)

(b) Derive EBITDA margin forecasts for the company for the next two (2) years. Explain how you derived your forecasts with reference to applicable company announcements. (2 marks)

(c) Derive forecasts for amortisation and depreciation and, subsequently, forecast EBIT for the next two (2) years. Explain how you derived your forecasts with reference to applicable company announcements. (3 marks)