Capital Budgeting

“Complete the capital budgeting part of the project after completion of Phase 1 Financial Statement Analysis. This part constitutes a smaller piece of the case project. This assignment will focus on capital budgeting plans and disclosures found in public company filings with the Securities and Exchange Commission in foursections as follows (Use the subheadings after an introductory paragraph):

  • Pro-forma Financial Statements. Using the Return on Assets (ROA), Return on Equity (ROE) and computed Plowback Ratio (Retained Earnings ratio) from the last couple of years, calculate the Internal Growth Rate as a floor and the Sustainable Growth Rate as the maximum growth rate. Justify in the report the growth rate you select. Using this growth rate, prepare Pro-forma Financial Statements for the next three to four years in proper format.
  • Capital Budgeting Disclosures. For your company, review the latest 10K filing and find any disclosure of the company’s capital budgeting activities. Write a paragraph or two for this section. Discuss the activities and the context in which they were disclosed; i.e., management discussion, footnotes to financial statements, etc. (If you haven’t mastered, yet, formatting MS Excel to look, display and print like a MS Word document, you may do the memo in Word and copy it into the proper sheet within your master workbook).
  • Research, Find, and Reviewat least two current financial analysts reports; e.g., Investopedia, Yahoo Finance, Google Finance, or other Financial Analyst’s analysis which discusses the capital budgeting plans of the company; write a summary of what you found and reference the sources.
  • Investing Activities. Review the financial statements, particularly the statement of cash flows in the 10-K and the accompanying notes and write a brief analysis of the significant investments you found there for the period covered by the 10-K.
  • Summary. Write a summary of what you learned from this exercise. Save workbook with the capital budgeting worksheet and submit the workbook in Bb through the submission link as indicated.”
                              PATRIOT TRANSPORTATION HOLDING, INC
                   Proforma Income Statement
For Year Ending September 30
                 (Amounts in thousands)
Sustainable Internal Growth Rate Assumption = 7.25% Pro-Forma Income Statement
Sep. 30, 2018 Sep. 30, 2019 Sep. 30, 2020 Sep. 30, 2021
Revenues:
Total revenues  $ 114,065  $ 122,338  $ 131,211  $ 140,728
Cost of operations:
Compensation and benefits 48,010 51,492 55,227 59,232
Fuel expenses 17,434 18,698 20,055 21,509
Repairs & tires 7,194 7,716 8,275 8,876
Other operating 4,679 5,018 5,382 5,773
Insurance and losses 11,729 12,580 13,492 14,471
Depreciation expense 8,759 9,394 10,076 10,806
Rents, tags & utilities 3,385 3,631 3,894 4,176
Sales, general & administrative 9,735 10,441 11,198 12,011
Corporate expenses 2,124 2,278 2,443 2,620
Gain on property sale 0 0 0 0
Gain on equipment sales (1,030) (1,105) (1,185) (1,271)
Total cost of operations 112,019 122,353 131,227 140,745
Total operating profit 2,046 (15) (16)  $ (17)
BP claim Settlement 0 0 0 0
Interest income and other 190 204 219 234
Interest expense (39) (42) (45) (48)
Income before income taxes 2,197 2,356 2,527 2,711
(Benefit from) Provision for income taxes (2,922) (3,134) (3,361) (3,605)
Net income  $ 5,119  $ 5,490  $ 5,888 6,316
Earnings per common share:
Net income – basic  $ 1.54  $ 1.65  $ 1.77  $ 1.90
Net income – diluted  $ 1.54  $ 1.65  $ 1.77  $ 1.90
Number of shares (in thousands) used in computing:
-basic earnings per common share 3,318 3,559 3,817 4,094
-diluted earnings per common share 3,320 3,561 3,819 4,096
Transportation
Revenues:
Transportation revenues  $ 103,131  $ 110,611  $ 118,634  $ 127,238
Fuel Surcharges
Revenues:
Transportation revenues  $ 10,934  $ 11,727  $ 12,578  $ 13,490
                                      GROWTH ANALYSIS:
Dividend Ratio 0.00
Plowback Ratio 1.00
Return On Assets (ROA ) 1.86%
Return On Equity (ROE) 6.76%
Internal Growth Rate (IGR) 1.89%
Sustainable Internal Growth Rate (SIGR ) 7.25%

Last Updated on February 13, 2019 by Essay Pro