Analysts who follow Green Mountain Coffee (GMCR) expect a future sales growth in the low 20s with an operating margin between 8% - 8.2%. We will assume a future sales growth of 21% for the next 5 years.
We will assume that debt has a 5 year maturity. The company's debt is subject to "variable interest rates (Fleet Bank's prime rate, Banker's Acceptance or LIBOR rates) plus a margin based on a performance price structure. A 100 basis point increase in interest rates would increase annual interest expense by approximately $85,000."
Capital expenditures and noncash working capital vary contemporaneously with sales (no lags) Depreciation is 73% of Capital Expenditures e.g. Depreciation/CapEx = .73 In the stable growth period: - Beta for the firm is equal to 1 (beta of the market) in the constant growth/stable growth period - Growth rate in sales and EBIT in the stable growth period will be similar to the 1990-1998 average of the growth rate in sales (and EBIT) in the S&P Industrials. - Capital Expenditures will equal Depreciation (only incur "maintenance" capital spending)
Green Mountain Coffee (GMCR) Source: www.marketguide.com Annual Income Statement (In Millions of Dollars) Total Revenue Cost of Revenue Gross Profit Selling, General, Administrative Expenses Research and Development Depreciation and Amortization Unusual Expense (Income) Total Operating Expense Operating Income Interest Expense, Net Non-Operating Interest/Investment Income, Non-Operating Interest Income (Expense), Net Non-Operating Gain (Loss) on Sale of Assets Other, Net Income Before Tax Income Tax Income After Tax Minority Interest Equity in Affiliates Net Income Before Extraordinary Items Accounting Change Discontinued Operations Extraordinary Item Net Income Basic/Primary Weighted Average Shares Basic/Primary Earnings per Share (EPS) Diluted Weighted Average Shares Diluted EPS excluding Extraordinary Items Diluted EPS including Extraordinary Items Preferred Dividends Common Dividends
9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 84.0 64.9 55.8 42.9 33.4 50.5 39.3 36.6 27.2 20.6 33.5 25.6 19.3 15.7 12.7 26.6 21 18 13.7 10.6 0.10 0.20 0.00 0.20 0.00 77.2 60.5 54.5 41.1 31.2 6.8 4.3 1.3 1.8 2.2 (0.6) (0.7) (0.8) (0.5) (0.4) (0.6) (0.7) (0.8) (0.5) (0.4) 0.0 0.0 0.1 0.0 0.0 6.2 3.6 0.5 1.3 1.7 2.1 1.4 0.2 (0.3) 0.3 4.2 2.2 0.3 1.5 1.4 4.2 2.2 0.3 1.5 1.4 0.0 0.0 0.0 0.0 0.1 0.2 (1.6) (0.2) (0.2) 4.2 2.4 (1.2) 1.3 1.3 3.29 3.5 3.5 3.43 3.4 1.261 0.641 0.1 0.448 0.42 3.49 3.55 3.5 3.47 3.43 1.19 0.633 0.1 0.444 0.417 1.207 0.686 (0.344) 0.382 0.368 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Green Mountain Coffee (GMCR) Source: www.marketguide.com Balance Sheet (In Millions of Dollars) Cash and Short Term Investments Total Receivables, Net Total Inventory Prepaid Expenses Other Current Assets Total Current Assets Gross Property, Plant, & Equipment Accumulated Depreciation Net Property, Plant, & Equipment Goodwill, Net Intangibles, Net Long Term Investments Other Long Term Assets Total Assets Accounts Payable Accrued Expenses Notes Payable/Short Term Debt Current Portion LT Debt/Capital Leases Other Current Liabilities Total Current Liabilities Long Term Debt Capital Lease Obligations Total Long Term Debt Total Debt Deferred Income Tax Minority Interest Total Liabilities Redeemable Preferred Stock Preferred Stock-Non Redeemable, Net Common Stock Additional Paid-In Capital Retained Earnings (Accum. Deficit) Treasury Stock - Common Other Equity Total Equity Total Liability & Shareholders' Equity Shares Outstanding - Common Stock Total Common Shares Outstanding Employees (actual figures)
9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 0.5 0.4 0.8 0.8 0.6 8.5 6.2 4.8 4.1 2.8 5.4 5.4 5.6 5.2 3.3 0.0 0.0 0.0 0.8 1.2 1.6 1.2 1.1 15.1 13.3 12.8 11.4 7.7 21.5 18.1 20.5 20.2 15.9 (10.2) (8.0) (9.7) (8.9) (7.1) 11.3 10.2 10.8 11.3 8.7 0.0 0.0 0.0 0.8 0.4 1 0.9 0.8 27.2 23.9 24.6 23.5 17.2 6.1 4.6 3.1 5 3 2 1.4 1.3 0.9 0.7 0.0 0.0 0.0 0.1 1.1 0.3 1.1 1.1 0.1 0.2 0.2 0 0 8.4 7.2 4.9 6.9 4.8 8.8 5 10.2 6 3.6 8.8 5 10.2 6 3.6 8.9 6.1 10.5 7 4.6 17.2 12.2 15.1 12.9 8.4 0.4 0.4 0.4 0.4 0.3 13.9 13.4 13 13 12.5 2.8 (1.4) (3.9) (2.7) (4.0) (7.0) (0.7) 0 0 0 10 11.7 9.5 10.7 8.9 27.2 23.9 24.6 23.5 17.2 3.1 3.51 3.54 3.53 3.42 3.1 3.51 3.54 3.53 3.42 394 342 321
Green Mountain Coffee (GMCR) Source: www.marketguide.com Items from the Cash Flow Statement (In Millions of Dollars) 9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 Depreciation 3.0 2.9 2.8 2.3 1.8 Capital Expenditures (4.6) (2.7) (3.6) (5.4) (2.5)
DDRX 1/31/1996 2/29/1996 3/29/1996 4/30/1996 5/31/1996 6/28/1996 7/31/1996 8/30/1996 9/30/1996 10/31/1996 11/29/1996 12/31/1996 1/31/1997 2/28/1997 3/31/1997 4/30/1997 5/30/1997 6/30/1997 7/31/1997 8/29/1997 9/30/1997 10/31/1997 11/28/1997 12/31/1997 1/30/1998 2/27/1998 3/31/1998 4/30/1998 5/29/1998 6/30/1998 7/31/1998 8/31/1998 9/30/1998 10/30/1998 11/30/1998 12/31/1998 1/29/1999 2/26/1999 3/31/1999 4/30/1999 5/28/1999 6/30/1999 7/30/1999 8/31/1999 9/30/1999 10/29/1999 11/30/1999
-0.03571 0.407407 -0.05263 -0.11111 -0.09375 -0.13793 -0.28 0.222222 0.068182 -0.19149 -0.10526 0.205882 -0.26829 -0.26667 0.113636 -0.20408 -0.15385 0.151515 0.578947 0.233333 -0.08108 -0.11765 -0.05 -0.26316 0.380952 0.051724 -0.06557 -0.05263 -0.07407 -0.48 0.461538 -0.15789 0.5 -0.16667 -0.15 -0.08824 0.032258 -0.09375 0.034483 -0.2 0.125 0 -0.01855 0.018899 0.259259
DRYR -0.03759 -0.04688 0.10852 0.02963 -0.02878 -0.06489 -0.11905 0.04505 -0.13371 0.02743 0.03883 0.08636 0.01724 0.04873 0.06861 -0.04972 0.1719 0.07646 0.06962 0.10651 0.11358 -0.20433 0.17221 -0.00392 -0.04663 -0.0163 -0.0263 0.14773 0.00248 -0.20375 -0.15373 -0.39083 0.07229 0.18247 0.0381 0.11229 -0.21074 0.04188 0.04261 0.05314 0.2156 -0.08498 0.25207 -0.10231 0.02382 -0.01799 -0.02564
SBUX -0.20238 0.05224 0.3227 0.16354 0 0.04147 -0.07965 0.25962 0.00763 -0.01515 0.06538 -0.17329 0.19651 -0.01825 -0.11896 0.00844 0.05439 0.23611 0.05136 0.00153 0.01982 -0.21076 0.05682 0.10036 -0.04723 0.08205 0.14534 0.06207 -0.0026 0.11328 -0.21637 -0.24627 0.14653 0.19862 0.0634 0.2168 -0.07238 0.01561 0.06147 0.31626 -0.00169 0.01864 -0.38103 -0.01613 0.08333 0.0971 -0.02299
SLE 0.05469 -0.03511 0.01544 -0.05703 0.08274 -0.02622 -0.01923 -0.0058 0.13492 -0.00699 0.11155 -0.05096 0.0604 -0.01367 0.04516 0.03704 -0.02179 0.01835 0.05255 -0.07652 0.2795 -0.00728 0.03873 0.06501 -0.03108 0.03973 0.09292 -0.03644 -0.00664 -0.04989 -0.10391 -0.09017 0.19008 0.10532 -0.0199 -0.03426 -0.09534 0.07108 -0.08966 -0.10606 0.0904 -0.05469 -0.0303 0.01705 0.05056 0.15775 -0.0897
FARM 0.00769 0.0146 -0.04317 -0.00338 0.08333 -0.03497 -0.01051 0.07721 0.03072 0.00728 -0.0297 0.03401 -0.04211 0.03448 -0.1 -0.02519 -0.03053 0 0.05197 0.11278 0 -0.00946 0.06849 0.19872 -0.00187 -0.04301 0.03933 0.07986 0.00439 0.195 -0.01402 -0.12766 0.04878 -0.05953 0.04467 0.01663 0.00093 -0.14754 0.11538 -0.01749 0.03145 -0.0122 -0.02247 0.01711 -0.17259 0.00452 0
NAFC -0.05479 -0.00406 -0.01471 0.04478 -0.03257 -0.04478 0.00781 0.01891 -0.01538 0.01563 0.18215 0.11842 -0.01176 -0.0569 -0.02548 -0.07843 0.14496 0.10625 -0.08475 0.06444 0.11111 -0.15263 -0.05938 0.01333 0.02632 0.00282 0.02581 -0.01258 -0.13096 -0.10741 -0.01245 -0.04672 0.04911 0.02979 -0.02529 -0.02146 -0.05263 -0.38222 0.01515 0.13433 -0.00368 0.07667 -0.09598 0.00301 -0.22759 -0.0625 0.11848
PLY -0.03759 -0.04688 0.10852 0.02963 -0.02878 -0.06489 -0.11905 0.04505 -0.13371 0.02743 0.03883 0.08636 0.01724 0.04873 0.06861 -0.04972 0.1719 0.07646 0.06962 0.10651 0.11358 -0.20433 0.17221 -0.00392 -0.04663 -0.0163 -0.0263 0.14773 0.00248 -0.20375 -0.15373 -0.39083 0.07229 0.18247 0.0381 0.11229 -0.21074 0.04188 0.04261 0.05314 0.2156 -0.08498 0.25207 -0.10231 0.02382 -0.01799 -0.02564
SMF -0.05059 0.03106 0.19277 -0.07879 0.07143 0.05128 -0.10537 0.01639 0.03226 -0.01875 -0.07979 -0.00347 0.04651 -0.03889 -0.09249 -0.01019 0.10323 0.1462 -0.02347 -0.01047 0.01058 -0.15236 -0.09598 -0.01096 -0.02083 0.10284 -0.00322 -0.09419 0.07143 -0.084 -0.26642 -0.199 -0.28696 0.21053 0.23188 -0.08941 -0.15584 0.08462 0.06383 0.07333 -0.04348 0.09091 -0.04762 -0.03125 0.03226 -0.0875 -0.24658
12/31/1999 1/29/2000 2/26/2000 3/31/2000 4/30/2000 5/28/2000 6/30/2000 7/30/2000 8/31/2000 9/30/2000 10/30/2000 11/30/2000 12/30/2000
-0.05882 0.7344 -0.06308 -0.05769 -0.30612 -0.02941 0.015176 -0.0448 0.0469 -0.19405 -0.23077 -0.5 -0.55008
0.02436 -0.11029 0.202481 0.419321 -0.06796 -0.11719 -0.00616 0.133931 -0.12795 0.041251 0.14203 0.116749 0.174942
-0.08706 0.319588 0.097656 0.275801 -0.32531 0.124547 0.123162 -0.018 -0.02333 0.093857 0.115445 0.01958 -0.02881
-0.09949 -0.1643 -0.17811 0.210085 -0.16667 0.218227 0.072918 -0.04531 0.025896 0.089692 0.06154 0.126411 0.023438
-0.04217 0.004621 0.012656 0.118751 -0.0079 -0.05113 0.047901 0.014446 -0.02095 0.044613 0.092879 -0.01314 0.077922
-0.12069 0.303927 -0.05264 0.055575 -0.09231 0.076071 0.06452 0.098484 0.096747 0.070514 0.185634 0.034707 -0.07426
0.02436 -0.125 0.857143 0.307692 0 -0.23529 -0.07692 0 0.25 -0.06667 -0.21429 -0.09091 0.4
0.05455 0.043103 -0.23967 0.293478 0.067227 0.031496 -0.06107 -0.02439 0.033333 -0.08871 -0.02655 0.118182 0.105691
SP500 0.033827 0.007763 0.007667 0.013939 0.022492 0.002725 -0.04602 0.019857 0.05401 0.025515 0.074057 -0.02144 0.061797 0.005766 -0.04329 0.059332 0.059227 0.042784 0.079027 -0.05647 0.052393 -0.0337 0.044744 0.01535 0.011085 0.070206 0.050018 0.010175 -0.01916 0.040151 -0.0116 -0.14424 0.061524 0.079231 0.060607 0.058538 0.041009 -0.03228 0.038794 0.037944 -0.02497 0.054438 -0.03205 -0.00625 -0.02855 0.062539 0.019179
GMCR 0.16 -0.10345 0.14423 -0.15966 0.16 -0.05172 0.06364 -0.04274 -0.01786 -0.03636 0.03774 -0.10909 0.16327 0.01754 -0.06897 -0.14815 0.26087 0.17241 0.13235 -0.01299 0.05263 0.0125 -0.2284 -0.104 0.03571 0.08621 -0.11111 0.01786 -0.15789 0 0.0625 -0.29412 0.11111 0.15 0 -0.04348 0.31818 -0.03448 -0.08929 0.16667 0.09244 -0.15769 0.02283 0.10714 0.16935 -0.22759 0.28571
0.057722 -0.0509 -0.02011 0.09672 -0.0308 -0.02191 0.023934 -0.01634 0.060699 -0.05348 -0.00495 -0.08007 0.004053
-0.125 0.380952 0.195402 -0.01923 0.372549 0.014286 -0.01761 -0.24373 0.421801 0.006667 0.655629 0.28 0.25
Per Share Data: S&P Industrials Year 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Sales 88.46 91.86 101.49 108.53 109.85 118.23 128.79 149.22 182.10 185.16 202.66 224.24 251.32 292.38 327.36 344.31 333.86 334.07 379.70 398.42 387.76 430.45 486.92 541.38 594.55 586.86 601.39 603.62 626.26 676.62 701.91 750.71 750.48 EBIT 14.48 14.28 16.08 16.63 15.54 17.22 19.39 23.64 27.97 26.63 29.23 32.20 36.19 42.01 43.08 44.50 42.67 45.57 51.50 53.23 51.02 58.89 74.31 79.52 82.47 75.10 78.17 82.16 91.28 104.67 112.69 123.15 121.44 Operating Growth Rate Growth Rate Margin Sales EBIT 16.4% 15.5% 3.8% -1.4% 15.8% 10.5% 12.6% 15.3% 6.9% 3.4% 14.1% 1.2% -6.6% 14.6% 7.6% 10.8% 15.1% 8.9% 12.6% 15.8% 15.9% 21.9% 15.4% 22.0% 18.3% 14.4% 1.7% -4.8% 14.4% 9.5% 9.8% 14.4% 10.6% 10.2% 14.4% 12.1% 12.4% 14.4% 16.3% 16.1% 13.2% 12.0% 2.5% 12.9% 5.2% 3.3% 12.8% -3.0% -4.1% 13.6% 0.1% 6.8% 13.6% 13.7% 13.0% 13.4% 4.9% 3.4% 13.2% -2.7% -4.2% 13.7% 11.0% 15.4% 15.3% 13.1% 26.2% 14.7% 11.2% 7.0% 13.9% 9.8% 3.7% 12.8% -1.3% -8.9% 13.0% 2.5% 4.1% 13.6% 0.4% 5.1% 14.6% 3.8% 11.1% 15.5% 8.0% 14.7% 16.1% 3.7% 7.7% 16.4% 7.0% 9.3% 16.2% 0.0% -1.4%
Price per Share (as of 1/10/01) Shares Outstanding (in Millions) Book Value of Equity (in Mil) Total Debt (in Millions) Operating Margin Cash & Equiv (in Millions) Revenue (in Millions) EBITDA EBIT (Operating Income) Enterprise Value (with Cash) Enterprise Value (exclu Cash) TEV/Sales TEV/EBITDA TEV/EBIT
DDRX 0.75 12.65 14 11 NMF 1.4 75 -17.5 -22
DRYR 33.5625 28.22 101 149 1.7% 2.1 1155.2 74.1 38.6
SBUX 44.00 188.16 1148.4 7.2 9.8% 132.2 2169.2 374.7 232.5
SLE 22.50 833.77 1026 5292 8.9% 225 17016 2328 1720
FARM 207 1.93 321.9 0 22.4% 239 217.7 53.2 47.7
NAFC 12.1875 11.48 180.7 361.4 0.6% 9.8 3994.2 104.2 59.2
20.4875 1096.134 19.0875 1094.034 0.27 NMF NMF 0.95 14.79 28.40
8286.24 24051.83 8154.04 23826.83 3.82 22.11 35.64 1.41 10.33 13.98
399.51 501.3125 160.51 491.5125 1.84 7.51 8.38 0.13 4.81 8.47
PLY 0.875 17.81 9.1 73.2 5.6% 1.5 176 15.2 11.2 88.78375 87.28375 0.50 5.84 7.93
SMF 8.375 29.20 261.90 132.1 1.4% 31 1850 63.5 28.7 376.65 345.65 0.20 5.93 13.12
GMCR 47.875 3.10 10.00 8.9
Aaa/AAA Aa1/AA+ Aa2/AA Aa3/AAA1/A+ A2/A A3/ABaa1/BBB+ Baa2/BBB Baa3/BBBBa1/BB+ Ba2/BB Ba3/BBB1/B+ B2/B B3/BCaa/CCC
1 Year 50 57 63 68 73 80 90 107 121 145 175 225 250 325 400 450 550
2 Year 59 63 66 76 87 100 108 123 133 155 205 250 300 350 425 500 600
3 Year 66 72 77 82 98 105 115 140 155 170 230 275 325 375 475 600 750
5 Year 77 88 95 102 118 125 135 155 175 190 250 300 375 475 600 750 900
7 Year 10 Year 30 Year 83 90 95 100 106 113 108 115 122 117 130 151 138 157 180 150 175 195 160 192 215 180 215 233 200 231 253 215 248 273 300 390 425 375 500 550 475 625 680 600 775 925 750 1000 1200 1000 1200 1450 1100 1500 1700
As of January 10, 2001 Source: http://bondchannel.bridge.com/EJVspreads.html
Bills 3 month 6 month 1 year
Coupon(%)
Mat Date Current Price Yield(%) 4/12/2001 5.15 5.29% 7/12/2001 4.96 5.15% 11/29/2001 4.65 4.87%
Notes/Bonds 2 year 5 year 10 year 30 year
5.13% 5.75% 5.75% 6.25%
12/31/2002 11/15/2005 8/15/2010 5/15/2030
100-21 104-00 104-29 110-28
4.76% 4.81% 5.09% 5.50%
As of January 10, 2001 Source: http://www.bloomberg.com
Interest Coverage Ratios For large manufacturing firms If interest coverage ratio is > = to Rating is -100000 0.199999 D 0.2 0.649999 C 0.65 0.799999 CC 0.8 1.249999 CCC 1.25 1.499999 B1.5 1.749999 B 1.75 1.999999 B+ 2 2.499999 BB 2.5 2.999999 BBB 3 4.249999 A4.25 5.499999 A 5.5 6.499999 A+ 6.5 8.499999 AA 8.50 100000 AAA For smaller and riskier firms If interest coverage ratio is greater than = to Rating is -100000 0.499999 D 0.5 0.799999 C 0.8 1.249999 CC 1.25 1.499999 CCC 1.5 1.999999 B2 2.499999 B 2.5 2.999999 B+ 3 3.499999 BB 3.5 4.499999 BBB 4.5 5.999999 A6 7.499999 A 7.5 9.499999 A+ 9.5 12.499999 AA 12.5 100000 AAA For financial service firms If long term interest coverage ratio is greater than = to Rating is -100000 0.049999 D 0.05 0.099999 C 0.1 0.199999 CC 0.2 0.299999 CCC 0.3 0.399999 B0.4 0.499999 B 0.5 0.599999 B+ 0.6 0.799999 BB 0.8 0.999999 BBB 1 1.499990 A1.5 1.999990 A 2 2.499990 A+ 2.5 2.999990 AA 3 ############ AAA This table is from my good friend, Professor Aswath Damodaran's website http:www.stern.nyu.edu/~adamodar
In Millions Receivables Inventory Accounts Payable Noncash Working Capital Change in Working Capital EBIT (Operating Income) Depreciation Taxes Operating Cash Flow (OCF) Capital Expenditures (CapEx) Change in Working Capital Free Cash Flow to the Firm (FCFF) Sales CapEx/Sales CapExT-1/SalesT CapExT-2/SalesT Depreciation/CapEx DepreciationT/CapExT-1 Working Capital/Sales Year to Year Growth in Sales Year to Year Growth in EBIT Margin Analysis Cost of Goods Sold/Sales SGA/Sales Operating Expense/Sales Gross Margin (Gross Profit/Sales) Operating Margin (Operating Profit/Sales)
9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 8.5 5.4 6.1 7.8 7.8 6.8 3 2.1 7.7 4.6 7.8 -4.7 84
Cost of Equity Levered Beta Debt/Equity Marginal Tax Unlevered Beta Imputed Beta for GMCR Risk Premium Riskfree yield (5 years) Cost of Equity (Next 5 Years) Cost of Equity (Stable Growth) Cost of Debt EBIT for GMCR Interest Expense for GMCR Interest Coverage Imputed Bond Rating Bond Spread (AA, 5 years) Riskfree yield (5 years) Imputed b4 tax Cost of Debt Imputed After-tax Cost of Debt Weights Equity (in Millions) Debt (in Millions) Total Capital Weight for Equity Weight for Debt After-tax WACC (Next 5 years) After-tax WACC (Stable growth) DDRX DRYR SBUX SLE FARM NAFC 0.940339 0.696432 1.290369 0.617935 0.359714 0.266192 1.15942 0.157317 0.00087 0.282092 0 2.583043
5.50% 4.81% 7.12% 10.31% 9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 6.8 0.6 11.33 AA
PLY SMF Average 0.877759 0.694613 0.717919 4.697201 0.540176 1.177515 0.34 0.40397
GMCR 0.052624 0.059968 0.34 0.419959
In Millions Receivables Inventory Accounts Payable Noncash Working Capital Change in Working Capital EBIT (Operating Income) Depreciation Taxes Operating Cash Flow (OCF) Capital Expenditures (CapEx) Change in Working Capital Free Cash Flow to the Firm (FCFF) Sales CapEx/Sales CapExT-1/SalesT CapExT-2/SalesT Depreciation/CapEx DepreciationT/CapExT-1 Working Capital/Sales Year to Year Growth in Sales Year to Year Growth in EBIT Margin Analysis Cost of Goods Sold/Sales SGA/Sales Operating Expense/Sales Gross Margin (Gross Profit/Sales) Operating Margin (Operating Profit/Sales)
9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 8.5 6.2 4.8 4.1 2.8 5.4 5.4 5.6 5.2 3.3 6.1 4.6 3.1 5 3 7.8 7 7.3 4.3 3.1 0.8 -0.3 3 1.2 6.8 3 2.1 7.7 4.6 0.8 2.3 84 0.055 0.032 0.043 0.652 1.111 0.093 29.4% 58.1% 4.3 2.9 1.4 5.8 2.7 -0.3 3.4 64.9 0.042 0.055 0.083 1.074 0.806 0.108 16.3% 230.8% 1.3 2.8 0.2 3.9 3.6 3 -2.7 55.8 0.065 0.097 0.045 0.778 0.519 0.131 30.1% -27.8% 1.8 2.3 -0.3 4.4 5.4 1.2 -2.2 42.9 0.126 0.058 0.426 0.920 0.100 28.4% -18.2% 2.2 1.8 0.3 3.7 2.5 0 1.2 33.4 0.075
0.720 0.093
60.1% 31.7% 91.9% 39.9% 8.1%
60.6% 32.4% 93.2% 39.4% 6.6%
65.6% 32.3% 97.7% 34.6% 2.3%
63.4% 31.9% 95.8% 36.6% 4.2%
61.7% 31.7% 93.4% 38.0% 6.6%
Cost of Equity Levered Beta Debt/Equity Marginal Tax Unlevered Beta Imputed Beta for GMCR Risk Premium Riskfree yield (5 years) Cost of Equity (Next 5 Years) Cost of Equity (Stable Growth) Cost of Debt EBIT for GMCR Interest Expense for GMCR Interest Coverage Imputed Bond Rating Bond Spread (AA, 5 years) Riskfree yield (5 years) Imputed b4 tax Cost of Debt Imputed After-tax Cost of Debt Weights Equity (in Millions) Debt (in Millions) Total Capital Weight for Equity Weight for Debt After-tax WACC (Next 5 years) After-tax WACC (Stable growth) DDRX DRYR SBUX SLE FARM NAFC 0.940339 0.696432 1.290369 0.617935 0.359714 0.266192 1.15942 0.157317 0.00087 0.282092 0 2.583043
5.50% 4.81% 7.12% 10.31% 9/30/2000 9/25/1999 9/26/1998 9/27/1997 9/28/1996 6.8 0.6 11.33 AA 0.95% 4.81% 5.76% 3.80% A 4.3 0.7 6.14 1.3 0.8 1.63 B1.8 0.5 3.60 BBB 2.2 0.4 5.50 A-
148.4125 8.9 157.3125 0.943425 0.056575 6.93% 9.94%
PLY SMF Average 0.877759 0.694613 0.717919 4.697201 0.540176 1.177515 0.34 0.40397
GMCR 0.052624 0.059968 0.34 0.419959
Assumptions Growth rate in sales Expected operating margin CapEx/Sales Depreciation/CapEx Noncash Working Capital/Sales Marginal Tax Rate After-tax WACC (In Millions) Sales Capital Expenditures (CapEx) Depreciation Noncash Working Capital (NWC) EBIT (Operating Income) EBIT(1-Tax Rate) + Depreciation - Capital Expenditures - Change in Noncash Working Capital Free Cash Flow to the Firm Terminal Value Cumulative WACC PV Factor Present Value of FCFF Present Value of Terminal Wealth PV of Total Cash Flows Value of Operating Assets + Value of Cash & Equivalents Value of Firm - Value of Debt Value of Equity - Value of Equity Options Value of Common Stock Shares Outstanding Value per Share Price per Share (as of 1/10/01) Next 5 years Stable Pd 21.0% 3.8% 8.1% 14.7% 5.5% CapEx = Dep 73.0% 100% 9.5% 9.5% 34% 34% 6.93% 9.94% Current Year 84.0 4.6 3 7.8 6.8 4.5 3 4.6 0.8 2.1 2001 2002 2003 2004 2005
The justified value is based on the assumption that operating margins for this company will increase in the stable growth period and resemble that of the S&P Industrials. If we alternatively assume that GMCR's operating margin in its stable growth period will be similar to established companies in the food processing industry with which it competes such as Sara Lee (SLE) who has an operating margin of 8.9%, what will be the justified value per share? What if it has the same operating margin (9.8%) as Starbucks, another established company? 47.875 OpMargin Just Price 6% 7% 8% 9% 10% 11%
Stable Pd 2006
umption that increase in the of the S&P hat GMCR's eriod will be similar to essing industry with LE) who has an the justified value erating margin (9.8%)
Assumptions Growth rate in sales Expected operating margin CapEx/Sales Depreciation/CapEx Noncash Working Capital/Sales Marginal Tax Rate After-tax WACC (In Millions) Sales Capital Expenditures (CapEx) Depreciation Noncash Working Capital (NWC) EBIT (Operating Income) EBIT(1-Tax Rate) + Depreciation - Capital Expenditures - Change in Noncash Working Capital Free Cash Flow to the Firm Terminal Value Cumulative WACC PV Factor Present Value of FCFF Present Value of Terminal Wealth PV of Total Cash Flows Value of Operating Assets + Value of Cash & Equivalents Value of Firm - Value of Debt Value of Equity - Value of Equity Options Value of Common Stock Shares Outstanding Value per Share Price per Share (as of 1/10/01) Next 5 years Stable Pd 21.0% 3.8% 8.1% 14.7% 5.5% CapEx = Dep 73.0% 100% 9.5% 9.5% 34% 34% 6.93% 9.94% Current Year 84.0 4.6 3 7.8 6.8 4.5 3 4.6 0.8 2.1 2001 101.6 5.6 4.1 9.7 8.2 5.4 4.1 5.6 1.9 2 1.0693205 0.9351734 1.9 1.9 256.3 0.5 256.8 8.9 247.9 24.6 223.3 3.1 72.04 47.875 OpMargin Just Price $ 72.04 6% $ 24.28 7% $ 29.51 8% $ 35.10 9% $ 40.70 10% $ 46.29 11% $ 51.89 2002 122.9 6.8 5 11.7 10 6.6 5 6.8 2 2.8 2003 148.7 8.2 6 14.1 12 7.9 6 8.2 2.4 3.3 2004 179.9 9.9 7.2 17.1 14.6 9.6 7.2 9.9 3 3.9 2005 217.7 12 8.8 20.7 17.6 11.6 8.8 12 3.6 4.8
1.143446 1.22271 1.307469 1.398104 0.874549 0.817855 0.764836 0.715255 2.4 2.7 3.0 3.4 242.9 2.4 2.7 3.0 246.3
The justified value is based on the assumption that operating margins for this company will increase in the stable growth period and resemble that of the S&P Industrials. If we alternatively assume that GMCR's operating margin in its stable growth period will be similar to established companies in the food processing industry with which it competes such as Sara Lee (SLE) who has an operating margin of 8.9%, what will be the justified value per share? What if it has the same operating margin (9.8%) as Starbucks, another established company?
Stable Pd 2006 225.9 12.4 12.4 21.5 33.1 21.8 12.4 12.4 0.8 21 339.6
umption that increase in the of the S&P hat GMCR's eriod will be similar to essing industry with LE) who has an the justified value erating margin (9.8%)
Valuing Options or Warrants
Enter the current stock price (S) = Enter the strike price on the option (X) = Enter the expiration of the option (T) = Enter the standard deviation in stock prices (s) = Enter the annualized dividend yield on stock = Enter the treasury bond rate (rF) = Enter the number of warrants (options) outstanding = d1 N(d1) d2 N(d2) Value per Option Value of all options outstanding (In Millions) 2.1154459 0.982804 0.26342 0.6038866 43.86 24.62 $47.88 7.48 7 70.00% (volatility) 0.00% 4.95% 561463