This thesis deals with strategic financial planning using the method of simulation. Generally, strategic financial planning should (1) involve the key variables in the corporate growth process (2) reflect the dynamic interaction in the system and (3) incorporate the dimension of uncertainty.
This thesis introduces James A. Gentry's EPS growth model, proposes RE growth model to reflect Korean situation, and examines some cases. These two models integrate the investment and financing process by use of simulation. The measure used to link these two systems is the rate of return required on new investment in order for decision makers to achieve their financial goals (earnings-per-share growth goal or retained earnings growth goal).
Especially, RE growth model could provide Korean top management a good tool to communicate their expectations to lower levels of management, thereby allowing them to measure and evaluate the impact of various sets of assumptions on the company's strategic plans.
