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INPUTS FOR VALUATION Current Inputs Enter the current revenues of the firm = $ 12,406 Enter current capital invested in the firm = $ 20,000 { As a naïve estimate, you can use BV of debt + BV of Equity) Enter the current depreciation = $ 233 Enter the current capital expenditures for the firm = $ 298 Enter the change in Working Capital in last year = $ 115 Enter the value of current debt outstanding = $ Enter the number of shares outstanding = 1,500.00 High Growth Period Enter the growth rate in revenues for the next 5 years = Your Inputs 25.00%
What will all operating expenses be as a % of revenues in the fifth year? 70.00% (Operating expenses include depreciation: This is equal to (1-Pre-tax Operating Margin)) How much debt do you plan to use in financing investments? Enter the growth rate in capital expenditures & depreciation Enter working capital as a percent of revenues Enter the tax rate that you have on corporate income What beta do you want to use to calculate cost of equity = Enter the current long term bond rate = Enter the market risk premium you want to use = Enter your cost of borrowing money = Stable Period Enter the growth rate in revenues = Enter operating expenses as a % of revenues in stable period = 6.00% 75.00% 0% 25.00% 7.50% 36.00% 1.25 6.50% 5.50% 8.50%
Enter capital expenditures as a percent of depreciation in this period200.00% See capital expenditure worksheet (capex.xls) for details. How much debt do you plan to use in financing investments? Enter interest rate of debt in stable period = 5.00% 7.50%
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What beta do you want to use in the stable period =
1.10 ESTIMATED CASHFLOWS
Base Growth in Revenue Growth in Deprec'n Revenues Operating Expenses % of Revenues - $ Operating Expenses $ EBIT Tax Rate $ 70.00% 8,684 3,722 36.00% $ $ $ 12,406 $
1 25.00% 25.00% 15,508 $
2 25.00% 25.00% 19,384 $
3 25.00% 25.00% 24,230 $
4 25.00% 25.00% 30,288 $
5 25.00% 25.00% 37,860 $
6 21.20% 21.20% 45,886 $
7 17.40% 17.40% 53,871 $
8 13.60% 13.60% 61,197 $
9 9.80% 9.80% 67,194 $
10 6.00% 6.00% 71,226
70.00% 10,855 4,652 36.00% $ $
70.00% 13,569 5,815 36.00% $ $
70.00% 16,961 7,269 36.00% $ $
70.00% 21,202 9,086 36.00% $ $
70.00% 26,502 11,358 36.00% $ $
71.00% 32,579 13,307 36.00% $ $
72.00% 38,787 15,084 36.00% $ $
73.00% 44,674 16,523 36.00% $ $
74.00% 49,724 17,471 36.00% $ $
75.00% 53,420 17,807 36.00%
EBIT (1-t) + Depreciation
$ $
2,382 233 298 115 2,202
$ $ $ $ $
2,977 291 373 233 2,664
$ $ $ $ $
3,722 364 466 291 3,329
$ $ $ $ $
4,652 455 582 363 4,162
$ $ $ $ $
5,815 569 728 454 5,202
$ $ $ $ $
7,269 711 909 568 6,503
$ $ $ $ $
8,517 862 1,263 602 7,514
$ $ $ $ $
9,654 1,012 1,616 599 8,451
$ $ $ $ $
10,575 1,149 1,969 549 9,206
$ $ $ $ $
11,181 1,262 2,322 450 9,671
$ $ $ $ $
11,396 1,338 2,675 302 9,756
- Capital Expenditures $ - Change in WC = FCFF $ $
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Terminal Value (in '05) COSTS OF EQUITY AND CAPITAL 1 Cost of Equity Proportion of Equity After-tax Cost of Debt Proportion of Debt Cost of Capital Cumulative WACC 13.38% 100.00% 5.44% 0.00% 13.38% 113.38% 2 13.38% 100.00% 5.44% 0.00% 13.38% 128.54% 3 13.38% 100.00% 5.44% 0.00% 13.38% 145.73% 4 13.38% 100.00% 5.44% 0.00% 13.38% 165.22% 5 13.38% 100.00% 5.44% 0.00% 13.38% 187.32% 6 13.21% 99.00% 5.31% 1.00% 13.13% 211.92% 7 13.05% 98.00% 5.18% 2.00% 12.89% 239.23% 8 12.88% 97.00% 5.06% 3.00% 12.65% 269.48% 9 12.72% 96.00% 4.93% 4.00% 12.40% 302.91%
$ 167,813
10 12.55% 95.00% 4.80% 5.00% 12.16% 339.75%
Present Value
$
2,349
$
2,590
$
2,856
$
3,149
$
3,472
$
3,546
$
3,532
$
3,416
$
3,193
$
52,265
FIRM VALUATION Value of Firm - Value of Debt Value of Equity Value of Equity per Share $ $ $ $ 80,367 80,367 53.58
1995 Value of Firm by year $ Value of Debt $ $ 80,367 $ $
1996 88,453 $ $
1997 96,954 -
1998 $ 105,760 $ -
1999 $ 114,703 $ -
2000 $ 123,542 $ 1,235
2001 $ 132,250 $ 2,645
2002 $ 140,844 $ 4,225
2003 $ 149,448 $ 5,978
2004 $ 158,314 $ 7,916
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EVA Valuation Base 2,382 1 $ $ $ $ $ $ $ 2,977 2,675 302 267 $ $ $ $ 2 3,722 2,717 1,005 782 3 4,652 2,769 1,883 1,292 4 5,815 2,835 2,980 1,804 5 7,269 2,917 4,352 2,323
EBIT (1-t) - WACC (CI) EVA Terminal EVA PV PV of EVA + Capital Invested + PV of Chg Capital in Yr 10 = Firm Value WACC ROC Capital Invested
$
$ $ $ $
$ $ $ $
$ $ $ $
60,463 20,000 (96) This reconciles the assumptions on stable growth, ROC and Capital Invested
$
80,367
13.38% 14.89% 20,000 $ 13.38% 18.32% 20,314 $ 13.38% 22.47% 20,706 $ 13.38% 27.44% 21,197 $ 13.38% 33.33% 21,810
$
Calculation of Capital Invested Initial $ + Net Cap Ex + Chg in WC Ending $ Cumulated WACC
20,000
20,000
$ $ $ $
20,000 81 233 20,314 113.38%
$ $ $ $
20,314 102 291 20,706 128.54%
$ $ $ $
20,706 127 363 21,197 145.73%
$ $ $ $
21,197 159 454 21,810 165.22%
$ $ $ $
21,810 198 568 22,576 187.32%
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EVA Valuation 6 $ $ $ $ 8,517 2,964 5,552 2,620 $ $ $ $ 7 9,654 3,039 6,615 2,765 $ $ $ $ 8 10,575 3,134 7,441 2,761 9 11,181 3,244 7,938 2,620 10 Terminal Year 11,396 $ 12,080 3,364 $ 3,524 8,032 $ 8,556 138,838 43,229
$ $ $ $
$ $ $ $ $
apital Invested
$
13.13% 37.72% 22,576 $
12.89% 40.94% 23,579 $
12.65% 42.67% 24,782 $
12.40% 42.76% 26,151 $
12.16% 41.20% 27,661 $
12.16% 41.69% 28,975 (Adjusted to reflect terminal ROC)
$ $ $ $
22,576 401 602 23,579 211.92%
$ $ $ $
23,579 604 599 24,782 239.23%
$ $ $ $
24,782 820 549 26,151 269.48%
$ $ $ $
26,151 1,060 450 27,661 302.91%
$ $ $ $
27,661 1,338 302 29,301 339.75%
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EVA Valuation
Adjusted to reflect terminal ROC)
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