Refine Assumptions for PPE Forecast
Following are the income statement and balance sheet for Medtronic
PLC.
Consolidated Statement of Income ($ millions) For Fiscal Year Ended |
April 26, 2019 |
---|---|
Net sales | $30,557 |
Costs and expenses | |
Cost of products sold | 9,155 |
Research and development expenses | 2,330 |
Selling, general, and administrative expense | 10,418 |
Amortization of intangible assets | 1,764 |
Restructuring charges, net | 198 |
Certain litigation charges, net | 166 |
Other operating expense, net | 258 |
Operating profit (loss) | 6,268 |
Other nonoperating income, net | (373) |
Interest expense | 1,444 |
Income (loss) before income taxes | 5,197 |
Income tax provision | 547 |
Net income (loss) | 4,650 |
Net (income) loss attributable to noncontrolling interests | (19) |
Net income (loss) attributable to Medtronic | $ 4,631 |
Consolidated Balance Sheet ($ millions) | April 26, 2019 |
---|---|
Current assets | |
Cash and cash equivalents | $ 4,393 |
Investments | 5,455 |
Accounts receivable, less allowances of $190 | 6,222 |
Inventories, net | 3,753 |
Other current assets | 2,144 |
Total current assets | 21,967 |
Property, plant, and equipment, net | 4,675 |
Goodwill | 39,959 |
Other intangible assets, net | 20,560 |
Tax assets | 1,519 |
Other assets | 1,014 |
Total assets | $89,694 |
Current liabilities | |
Current debt obligations | $838 |
Accounts payable | 1,953 |
Accrued compensation | 2,189 |
Accrued income taxes | 567 |
Other accrued expenses | 2,925 |
Total current liabilities | 8,472 |
Long-term debt | 24,486 |
Accrued compensation and retirement benefits | 1,651 |
Accrued income taxes | 2,838 |
Deferred tax liabilities | 1,278 |
Other liabilities | 757 |
Total liabilities | 39,482 |
Shareholders' equity | |
Ordinary shares | 0 |
Additional paid-in capital | 26,532 |
Retained earnings | 26,270 |
Accumulated other comprehensive loss | (2,711) |
Total shareholders' equity | 50,091 |
Noncontrolling interests | 121 |
Total equity | 50,212 |
Total liabilities and shareholders' equity | $89,694 |
a. Use the financial statements along with the additional
information below to forecast property, plant and equipment, net
for fiscal year ended April 2020.
$ millions | April 27, 2018 Actual |
April 26, 2019 Actual |
April 2020 Forecast |
---|---|---|---|
Net sales | $29,953 | $30,557 | $33,002 |
CAPEX | 1,068 | 1,134 | |
Depreciation expense | 821 | 895 | |
Property, plant, and equipment, gross | 10,259 | 10,920 |
Round to the nearest million.
Forecasted PPE, net for FY2020 $Answer
million
b. Suppose the company discloses in a press release that
accompanies its year-end SEC filing that anticipated CAPEX for
fiscal year ended April 2020 is $1.5 billion. Use this guidance to
refine your forecast of property, plant and equipment, net for
fiscal year ended April 2020.
$Answer
million
Answers:-
a. $5,049 million
b. $5,779 million
Explanation:
Question a.
PPE for 2019 = $4,675 million
Net sales = $30,557 million
PPE as a % of net sales = 4,675 / 30,557 = 15.3%
PPE, net for 2020 (forecasted) = 15.3% x 33,002 = $5,049 million
Question b.
PPE, gross for 2018 = 10,259
Depreciation expense for 2018 = 821
PPE, net for 2018 = 10,259 - 821 = $9,438 million
Depreciation as a percentage of PPE, net and capex
= Depreciation / (PPE, net for 2018 + Capex of 2019)
= 895 / (9,438 + 1,134)
= 8.47%
Depreciation expense for 2019 = 4675 x 8.47% = $396 million
Forecasted PPE, net for 2020 = 4675 + 1500 - 396 = $5,779
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