Australian Mobile Telecommunications Association

Case study 2

Set the Forecast Horizon

The forecast horizon was lengthened to 15 years which is from 1995 to 2010. Based on the exhibit 1 and exhibit 2 we can make assumptions and modify the data by using the average of these two table to get our own data. So we expect the net income from 1995 to 2005 is a range from -12 to 157.5. The free cash flow is the net income +noncash items + working capital +the capital expenditure, the range is from -31 to 164.5. The data from 2006 to 2010 are based our assumptions

1.1 Assumptions:

Cancer diagnostics increased by 3.5% and 3.9% in 2004 and 2005, since the inflation and population increasing in the future, we believe more people will have cancer, so the cancer diagnostics will increased by 4% annually from 2006 to 2010.

Other diagnostics increased by 10.3% and 10.8% in 2004 and 2005, we can make assumption with a 11% growth rate annually in next 5 years with the same reason above.

The agriculture was forecast to grow at 6% annually in next 5 years. We considered the global financial crisis during that year, so the grow rate should be lower than 7.3% in 2005.

The human therapeutics was forecast to grow at 10% every year which is the average number among 2004 to 2006.

COGS, R&D and SG&Aare not flexible since the cost should be stable,so we predict the figures will be 30%, 6% and 22% of the total sales which are average numbers in the past years.

Other Income was excluded from the valuation, we will use average number which is -7.909

The tax rate is chosen as 30%, it is a prediction, not the actual results and it changes

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