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I NPUTS FOR VALUATI ON


Cur r ent I nputs
Enter the current revenues of the firm =
$ 12,406
Enter current capital invested in the firm =
$ 20,000 { As a nave 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 Gr owth Per iod
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 =

0%
25.00%
7.50%
36.00%
1.25

Enter the current long term bond rate =

6.50%

Enter the market risk premium you want to use =

5.50%

Enter your cost of borrowing money =

8.50%

Stable Per iod


Enter the growth rate in revenues =
Enter operating expenses as a % of revenues in stable period =

6.00%
75.00%

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?

5.00%

Enter interest rate of debt in stable period =

7.50%

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

1.10
ESTI M ATED CASHFLOWS

Base

10

Growth in Revenue

25.00%

25.00%

25.00%

25.00%

25.00%

21.20%

17.40%

13.60%

9.80%

6.00%

Growth in Deprec'n

25.00%

25.00%

25.00%

25.00%

25.00%

21.20%

17.40%

13.60%

9.80%

6.00%

Revenues

$ 12,406 $

15,508 $

19,384 $

24,230 $

30,288 $

37,860 $

45,886 $

53,871 $

61,197 $

67,194 $

71,226

70.00%

70.00%

70.00%

70.00%

70.00%

71.00%

72.00%

73.00%

74.00%

75.00%

10,855 $

13,569 $

16,961 $

21,202 $

26,502 $

32,579 $

38,787 $

44,674 $

49,724 $

53,420

9,086 $

11,358 $

13,307 $

15,084 $

16,523 $

17,471 $

17,807

36.00%

36.00%

36.00%

36.00%

36.00%

36.00%

Operating Expenses
% of Revenues

70.00%

- $ Operating Expenses$
EBIT

Tax Rate

8,684 $
3,722 $
36.00%

4,652 $
36.00%

5,815 $
36.00%

7,269 $
36.00%

36.00%

EBIT (1-t)

2,382 $

2,977 $

3,722 $

4,652 $

5,815 $

7,269 $

8,517 $

9,654 $

10,575 $

11,181 $

11,396

+ Depreciation

233 $

291 $

364 $

455 $

569 $

711 $

862 $

1,012 $

1,149 $

1,262 $

1,338

- Capital Expenditures $

298 $

373 $

466 $

582 $

728 $

909 $

1,263 $

1,616 $

1,969 $

2,322 $

2,675

- Change in WC

115 $

233 $

291 $

363 $

454 $

568 $

602 $

599 $

549 $

450 $

302

= FCFF

2,202 $

2,664 $

3,329 $

4,162 $

5,202 $

6,503 $

7,514 $

8,451 $

9,206 $

9,671 $

9,756

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Terminal Value (in '05)

$ 167,813
COSTS OF EQUI TY AND CAPI TAL

1
Cost of Equity
Proportion of Equity
After-tax Cost of Debt
Proportion of Debt
Cost of Capital
Cumulative WACC

Present Value

Value of Firm

10

13.38%

13.38%

13.38%

13.38%

13.38%

13.21%

13.05%

12.88%

12.72%

12.55%

100.00%

100.00%

100.00%

100.00%

100.00%

99.00%

98.00%

97.00%

96.00%

95.00%

5.44%

5.44%

5.44%

5.44%

5.44%

5.31%

5.18%

5.06%

4.93%

4.80%

0.00%

0.00%

0.00%

0.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

13.38%

13.38%

13.38%

13.38%

13.38%

13.13%

12.89%

12.65%

12.40%

12.16%

113.38%

128.54%

145.73%

165.22%

187.32%

211.92%

239.23%

269.48%

302.91%

339.75%

2,349 $

2,590 $

2,856 $

3,149 $

3,472 $

3,546 $

3,532 $

3,416 $

3,193 $

52,265

FI RM VALUATI ON
80,367

- Value of Debt

Value of Equity

80,367

Value of Equity per Share

53.58

1995
Value of Firm by year

$ Value of Debt

1996

80,367 $
-

1997

88,453 $
-

1998

1999

2000

2001

2002

2003

2004

96,954 $ 105,760 $ 114,703 $ 123,542 $ 132,250 $ 140,844 $ 149,448 $ 158,314


-

1,235 $

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2,645 $

4,225 $

5,978 $

7,916

EVA Valuation

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

$
$
$

Base
2,382

Cumulated WACC

1
2,977
2,675
302

$
$
$

2
3,722
2,717
1,005

$
$
$

3
4,652
2,769
1,883

$
$
$

4
5,815
2,835
2,980

$
$
$

5
7,269
2,917
4,352

267

782

1,292

1,804

2,323

60,463
20,000
(96) This reconciles the assumptions on stable growth, ROC and Capital Invested

80,367

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

$
$
$

20,000

20,000

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

$
$
$
$

20,000
81
233
20,314

20,314
102
291
20,706

20,706
127
363
21,197

21,197
159
454
21,810

21,810
198
568
22,576

$
$
$
$

113.38%

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128.54%

$
$
$
$

145.73%

$
$
$
$

165.22%

$
$
$
$

187.32%

EVA Valuation

$
$
$

6
8,517
2,964
5,552

$
$
$

7
9,654
3,039
6,615

$
$
$

8
10,575
3,134
7,441

$
$
$

9
11,181
3,244
7,938

2,620

2,765

2,761

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 $

$
$
$
$

22,576
401
602
23,579

23,579
604
599
24,782

24,782
820
549
26,151

26,151
1,060
450
27,661

27,661
1,338
302
29,301

211.92%

$
$
$
$

239.23%

$
$
$
$

269.48%

$
$
$
$

$
$
$
$

302.91%

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339.75%

12.16%
41.69%
28,975 (Adjusted to reflect terminal ROC)

EVA Valuation

Adjusted to reflect terminal ROC)

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