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INPUTS FOR VALUATION
Current Inputs
Enter the current revenues of the firm =
$435
Enter current capital invested in the firm =
$603
{ As a naïve estimate, you can use BV of debt + BV of Equity)
Enter the current depreciation =
$9
Enter the current capital expenditures for the firm = $16
Enter the change in Working Capital in last year$(170)
=
Enter the value of current debt outstanding = $Enter the number of shares outstanding =
39.84
High Growth Period

Your Inputs

Enter the growth rate in revenues for the next 5 years =

20.00%

What will all operating expenses be as a % of revenues in the fifth
75.00%
year?(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 =

0%
10.00%
8.00%
38.00%
0.80

Enter the current long term bond rate =

5.00%

Enter the market risk premium you want to use =

5.50%

Enter your cost of borrowing money =

8.50%

Stable Period
Enter the growth rate in revenues =

7.00%

Enter operating expenses as a % of revenues in stable period = 75.00%
Enter capital expenditures as a percent of depreciation in this period
150.00% See capital expenditure worksheet (capex.xls) for details.
How much debt do you plan to use in financing investments?

0.00%

Enter interest rate of debt in stable period =

0.00%

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What beta do you want to use in the stable period =

1.10
ESTIMATED CASHFLOWS

Base

1

2

3

4

5

6

7

8

9

10

Growth in Revenue

20.00%

20.00%

20.00%

20.00%

20.00%

17.40%

14.80%

12.20%

9.60%

7.00%

Growth in Deprec'n

10.00%

10.00%

10.00%

10.00%

10.00%

9.40%

8.80%

8.20%

7.60%

7.00%

Revenues

$461

$553

$664

$797

$956

$1,147

$1,347

$1,546

$1,735

$1,901

$2,034

Operating Expenses
% of Revenues
- $ Operating Expenses
EBIT
Tax Rate

EBIT (1-t)
+ Depreciation
- Capital Expenditures
- Change in WC
= FCFF

69.70%

75.00%

75.00%

75.00%

75.00%

75.00%

$321

$384

$477

$581

$707

$860

$1,010

$1,160

$1,301

$1,426

$1,526

$140

$169

$187

$216

$249

$287

$337

$387

$434

$475

$509

38.00%

69.50%

38.00%

71.82%

38.00%

72.88%

38.00%

73.94%

38.00%

75.00%

38.00%

38.00%

38.00%

38.00%

38.00%

38.00%

$87

$105

$116

$134

$154

$178

$209

$240

$269

$295

$315

$9

$10

$11

$12

$13

$14

$15

$17

$18

$19

$21

$16

$17

$19

$21

$23

$25

$27

$28

$29

$30

$31

$(170)
$250

$7

$9

$11

$13

$15

$16

$16

$15

$13

$11

$89

$99

$114

$131

$151

$182

$213

$243

$271

$294

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Terminal Value (in '15)

$7,775
COSTS OF EQUITY AND CAPITAL
1

Cost of Equity

2

3

4

5

6

7

8

9

10

9.40%

9.40%

9.40%

9.40%

9.40%

9.73%

10.06%

10.39%

10.72%

11.05%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

After-tax Cost of Debt

5.27%

5.27%

5.27%

5.27%

5.27%

4.22%

3.16%

2.11%

1.05%

0.00%

Proportion of Debt

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Proportion of Equity

Cost of Capital
Cumulative WACC

Present Value

9.40%

9.40%

9.40%

9.40%

9.40%

9.73%

10.06%

10.39%

10.72%

11.05%

109.40%

119.68%

130.93%

143.24%

156.71%

171.95%

189.25%

208.92%

231.31%

256.87%

$82

$82

$87

$92

$96

$106

$112

$116

$117

$3,141

FIRM VALUATION
Value of Firm
- Value of Debt
Value of Equity
Value of Equity per Share

$4,032
$$4,032
$101.20

2007
Value of Firm by year
$ Value of Debt

$4,032
$-

2008
$4,321
$-

2009
$4,629
$-

2010
$4,950
$-

2011
$5,284
$-

Page 3

2012
$5,630
$-

2013
$5,996
$-

2014
$6,386
$-

2015
$6,807
$-

2016
$7,266
$-

EVA Valuation
Base
EBIT (1-t)
- WACC (CI)
EVA
Terminal EVA
PV
PV of EVA
+ Capital Invested
+ PV of Chg Capital in Yr 10
= Firm Value

1
$87

Cumulated WACC

3
$116
$58
$58

4
$134
$60
$74

$154
$62
$93

$44
$48
$57
$65
$3,627
$603
$(198) This reconciles the assumptions on stable growth, ROC and Capital I

$4,032

WACC
ROC
Capital Invested
Calculation of Capital Invested
Initial
+ Net Cap Ex
+ Chg in WC
Ending

2
$105
$57
$48

9.40%
17.35%
$603

$603

$603

$603
$8
$7
$618
109.40%

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9.40%
18.76%
$618

$618
$9
$9
$636
119.68%

9.40%
21.07%
$636

$636
$9
$11
$656
130.93%

9.40%
23.56%
$656

$656
$10
$13
$679
143.24%

EVA Valuation
5

6

7

8

9

10

$178
$64
$114

$209
$69
$140

$240
$74
$166

$269
$79
$190

$295
$84
$210

$73

$81

$88

$91

$91

$315
$89
$226
$7,453
$2,989

owth, ROC and Capital Invested

9.40%
26.19%
$679

$679
$11
$15
$706
156.71%

9.73%
29.58%
$706

$706
$11
$16
$733
171.95%

10.06%
32.70%
$733

$733
$11
$16
$760
189.25%

10.39%
35.39%
$760

$760
$11
$15
$786
208.92%

Page 5

10.72%
37.50%
$786

$786
$11
$13
$810
231.31%

11.05%
38.94%
$810

$810
$10
$11
$831
256.87%

EVA Valuation
Terminal Year
$337
$36
$302

11.05%
104.93%
$322 (Adjusted to reflect terminal ROC)

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Sheet4
High Growth
Revenue
Operating Margin
No debt
Tax Rate
Cost of Capital

Revenue
Operating Margin
Gross Profit
Tax %
EBIT(1-t)
Depreciation
Change in Working Capital
Capex
FCFF
Terminal Value in year 10

Transition
Revenue
Slow to 10%
Operating Margin Increase to 35%
No debt
Tax rate 38%

20%
30%
38%
9.35%

Base Year
Year 1
Year 2
461
553.2
30.00%
30.00%
138.3
165.96
40%
40%
82.98
99.58
9
9.9
$0
7.38
16
17.28
$76
84.83

Year 3
663.84
30.00%
199.15
40%
119.49
10.89
8.85
18.66
102.87

796.61
30.00%
238.98
40%
143.39
11.98
10.62
20.16
124.59

87.92

98.61

Present Value Calculations
$75.98
Firm Value
Equity Value
Debt Value
Shares Outstanding
Per Share Value

77.58

$5,972.59
39.04
$153

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Sheet4

Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
955.93
1147.12
1307.71
1477.71
1655.04
1837.09
30.00%
30.50%
31%
32%
33%
34%
286.78
349.87
405.39
472.87
546.16
624.61
40%
40%
40%
40%
40%
40%
172.07
209.92
243.23
283.72
327.7
374.77
13.18
14.49
15.22
15.98
16.78
17.62
12.75
15.29
12.85
13.6
14.19
14.56
21.77
23.51
25.39
27.42
29.61
31.98
150.73
185.61
220.22
258.68
300.68
345.84

111.08

128.9

142.63

157.35

Page 8

169.4

182.02

Sheet4

Year 10
2020.8
35%
707.28
40%
424.37
18.5
14.7
34.54
393.63
9315.87

196.81
4544.33

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