Financial Modelling and Forecasting

Essay by nieblakeUniversity, Bachelor'sA-, October 2013

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Table of Contents

2Executive Summary �

3Forecast Short-Term Australian Retail Turnover �

31.1 Seasonally Adjusted Furniture Market �

41.2 Holt's approach �

51.3 Nick Scali's Market Share �

51.4 Nick Scali's sale forecast �

6Estimate Financial Model Parameters �

62.1 Financial Model Parameters �

7Generate Sales Forecasts �

83.1 Single Regression Model �

83.2 Multiple regression model. �

93.3 Annual Forecast �

11Estimate WACC and the Long-Run FCF Growth Rate �

11Risk Free Rate (3.43%) �

11Market Risk Premium (4.54 %) �

11Beta of NCK industry (1.34) �

11Cost of Equity (9.52%) �

11Cost of Debt (6.23%) �

12D&E and Tax rate �

12Long-term FCF growth rate (3.56%) �

12Develop the Spreadsheet Model �

15Share Price �

15Return of Equity & Debt-to-equity Ratio �

16Perform Sensitivity Analysis and Market Calibration �

166.1 Sensitivity analyses in relation to CA/sales ratio. NFA/sales ratio and OE/sales ratio �

186.2 Sensitivity of long-run FCF growth rate & WACC.


186.3 Other Variable �

197. Justify the Valuation �

20References �


Executive Summary

Nick Scali Limited (NCK) is an Australian retailer and importer of quality furniture, specializing in quality leather and fabric lounges, dining rooms, bedrooms and occasional furniture. Core brands include Nick Scali brand, Sofas2Go and Chateau d'Ax. (FinAnalysis, 2013)

This report will explore NCK's financial structuring and forecasting the future sales for management's planning purpose. In this report we will build a financial model of Nick Scali to predict the long-term cash flow and future cash flow of company.

The first part will introduce the short term Australian retail turnover and use both seasonally adjusted method and Holt's approach to forecast Nick Scali's sales.

Then the report will conduct some important parameter to prepare for the financial statement model.

In part three, we will use both single regression model and multiple...