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Exhibit 1 Condensed Operating and Stockholder Information, Robertson Tool Co.

(in millions of dollars)

Operations 1998 1999 2000 2001 2002


Sales 48.5 49.1 53.7 54.8 55.3
COGS 32.6 33.1 35.9 37.2 37.9
SG&A 10.7 11.1 11.5 11.9 12.3
Depreciation 2 2.3 2.4 2.3 2.1
Interest expense 0.4 0.7 0.8 0.8 0.8
Operating profit 2.8 1.9 3.1 2.6 2.2
Tax @ 40% 1.1 0.8 1.2 1.0 0.9
EBIAT 1.7 1.1 1.9 1.6 1.3

Percentage of sales
COGS/Sales 67.2% 68.2% 74.0% 76.7% 78.1%
SG&A/Sales 22.1% 22.9% 23.7% 24.5% 25.4%
Oper. Profit/Sales 5.8% 3.9% 6.4% 5.4% 4.5%

Stockholder information
Earnings per share 2.91 1.88 3.25 2.74 2.23
Dividends per share 1.6 1.6 1.6 1.6 1.6
Book value per share 49.4 49.68 51.33 52.47 53.1
Market price 33-46 35-48 29-41 25-33 23-32
P/E ratio 11-16 10-26 9-13 9-12 10-14
Shares outstanding 584,000 584,000 584,000 584,000 584,000 0.584

Exhibit 5 Five-year forecast of Monmouth, Inc., Earnings, Excluding Robertson Tool Co. (in millions of dollars except per-share
2003 2004 2005 2006 2007
Net income 11.0 11.9 12.8 13.8 15.0
Shares outstanding 4.2 4.2 4.2 4.2 4.2
Earnings per share 2.61 2.83 3.04 3.28 3.56
Exhibit 2 Balance sheet at December 31, 2001, Robertson Tool Co. (in millions of dollars)

Assets Liabilities and Net worth


Cash 1 Accounts payable 2
Accounts receivable 8 Other 2
Inventories 18 Current liabilities 4
Other 1 Long-term debt 12
Current assets 28
Net Plant and Equipment 19 Net worth 31
Total assets 47 Total Liabilities and net worth 47

of dollars except per-share data)


Discounted Cash Flow Valuation of Robertson Tool Co. FIN 419 - Problems og Managerial Finance
Key assumptions: Case: Monmouth, Inc.
Annual growth rate in sales (2003-2006) = 6.0% from text
growth rate after 2006 = 0.0% Student name: Vanya Rusinova
Income tax rate = 40% from text
Net working capital/Sales = 43.4% from Exhibits 1 and 2
PP&E/Sales = 34.4% from Exhibits 1 and 2
Depreciation/PP&E ratio = 11.1% from Exhibits 1 and 2
WACC = 9.93% own calculations

Pro-formas for Robertson Tool Co. Actual Forecast


2002 2003 2004 2005 2006

Sales $ 55.3 58.6 62.1 65.9 69.8


COGS $ 37.9 39.9 41.6 43.5 45.4
SG&A $ 12.3 12.3 12.4 12.5 13.3
Depreciation $ 2.1 2.2 2.4 2.5 2.7
Operating profit (EBIT) $ 3.0 $ 4.2 $ 5.7 $ 7.4 $ 8.5
Tax @ 40% $ 1.2 $ 1.7 $ 2.3 $ 3.0 $ 3.4
EBIAT $ 1.8 $ 2.5 $ 3.4 $ 4.4 $ 5.1

COGS/Sales 69% 68% 67% 66% 65%


SG&A/Sales 22% 21% 20% 19% 19%

Net plant & equipment (begin) $ 19.0 $ 20.8 $ 21.9 $ 23.0


Capital expenditures $ 4.0 $ 3.5 $ 3.6 $ 3.8
Depreciation expense $ 2.2 $ 2.4 $ 2.5 $ 2.7
Net plant & equipment (end) $ 19.00 $ 20.8 $ 21.9 $ 23.0 $ 24.2

Cash flow projections and enterprise value


Depreciation 2.2 2.4 2.5 2.7
Cash flow from operations 4.8 5.8 6.9 7.8
NWC 24.0 25.4 27.0 28.6 30.3
Increase in NWC 1.4 1.5 1.6 1.7
Capital expenditures $ 4.0 $ 3.5 $ 3.6 $ 3.8
Free cash flow $ (0.68) $ 0.76 $ 1.71 $ 2.25
Terminal value at the end of 2007

Total cash flow $ (0.68) $ 0.76 $ 1.71 $ 2.25


Discounted cash flows $ (0.68) $ 0.69 $ 1.42 $ 1.69
Enterprise value (Present value of cash flows) = $18.77
Price/share $32.13

WACC 9.9% $32.13 8.9% 9.5% 9.9%


V $ 37.7 0.0%
D/V 31.8% 0.5%
E/V 68.2% 1.0%
Times Interst Earned 2.25 1.5%
Kd 14.6% 2.0%
ATCD 8.7%
Unlevered Beta 0.73
Equity Beta 1.06
Market Risk Premium 6.0%
Rf 4.1%
Ke 10.48%
nagerial Finance
Monmouth, Inc.

Vanya Rusinova

2007

74.0
48.1
14.1
2.8
$ 9.0
$ 3.6
$ 5.4

65%
19%

$ 24.2
$ 2.9
$ 2.8
$ 24.3

2.8
8.2
32.1
1.8
$ 2.9
$ 3.51
35.37

$ 38.88
$ 26.62

10.5% 10.9%