You are to complete a five-year forecast of the income statement, balance sheet and ratios for your selected company. You will need to expand the next five columns for the forecast results. You will need to have completed Homework 2 in order to complete this assignment. The forecasted numbers must be supported by ASSUMPTIONS for each number forecasted number for the income statement and balance sheet on a separate spreadsheet and supplied in the forecast section. (30 pts This part of the assignment is needed for the stock valuation of your company in assignment and the Investment Decision of the project, specifically Discounted Cash Flow Valuation, which is one of two evaluation methods needed for the final project.
INDIVIDUAL WORK IS ONLY ACCCEPTABLE.
- You will need a one-page discussion on the economic health of the United States and Industry. The first paragraph should include numbers and a discussion of GDP, Inflation, unemployment, Consumer spending, Consumer Confidence and any related statistics to your company. The second paragraph should include a discussion of the industry based on the main NAICS code for your company and discuss industry growth, competitors (top three), PEST analysis and Porter analysis as shown below. This one page summary should include reference and citations for this report and a reference page in WORD. (30 pts) SEE INFORMATION BELOW FOR GUIDANCE ON THE INDUSTRY ANALYSIS!!! There should be no reference to your company at all in this section unless the firm is a leader in the industry.
Figure 1 – Porter’s Five Forces
1.Supplier Power: Here you assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers’ help, the more powerful your suppliers are.
2.Buyer Power: Here you ask yourself how easy it is for buyers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, then they are often able to dictate terms to you.
3.Competitive Rivalry: What is important here is the number and capability of your competitors. If you have many competitors, and they offer equally attractive products and services, then you’ll most likely have little power in the situation, because suppliers and buyers will go elsewhere if they don’t get a good deal from you. On the other hand, if no-one else can do what you do, then you can often have tremendous strength.
4.Threat of Substitution: This is affected by the ability of your customers to find a different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power.
5.Threat of New Entry: Power is also affected by the ability of people to enter your market. If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
Industry analysis should also include the following if possible:
- Describe and define the industry
- Describe the current industry nature (i.e. stable, growing, declining, rapid change)
- Identify the life-cycle of the industry or market (i.e. mature, emerging, changing)
- Identify and describe the current forces that drive the industry
- Describe current trends and important developments in the industry
- Identify the most important players
- Any problems the industry is experiencing
- How does distribution work in the industry?
- Describe the supply chain relationships that may exist
- Industry profitability
Key success factors (i.e. What do customers want?; How does a firm survive the competition? and How does a company obtain a superior competitive advantage?)
LOOK AT THE DOCUMENTS PROVIDED FOR THE THINGS MENTIONED ABOVE
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