Financial modelling is an important exercise and it involves complex decisions. There are different complex methods which are being used by the different by the people in the industry. These methods are mainly statistical in nature. Here various methods of forecasting have been used to analyse the different aspects of financial modelling. First the sales are forecasted using different methods. Apart from the normal statistical methods, regression which takes into account the external data has also been used. All the results have been present in the following report. Although these methods are not fool proof methods to forecast the variables and there are disadvantages to use the models. These methods are used to forecast the sales value. The cost of the firm is also forecasted. Using this and the cost of the capital of the firm the share price of the firm is calculated. This share price calculation is done using the free cash flow method. The value of the stock comes more than the current value keeping in the mind that the future growth of the sales will be higher.
However investor needs to know these deficiencies to use the model efficiently. If the investor can know the defects of the firm then it can be easy for the investor to accurately forecast the future income and thus the can make sound decisions.
The sale which is estimated by the company and released on 25/07/2014 is $16 billion. However the profit estimated by the firm is $320m.
The sales forecast of the model is almost $20 billion and the profit forecast $232m
The long term growth rate value is taken as the 3.5% (long term growth rate +inflation). The long term growth rate is estimated to be 0.5% and inflation is taken from the RBA website to be 3%. This rate is also added to the cost of equity as it would be inconsistent to not include cost of inflation while discounting the cash flows.
The value of the share comes to 63.