SOFTTEC PRODUCTS COMPANY

Base Case Results [Parts A, B, C, D, & E]:

Chapter 10 Mini Case Percent Change in Net Sales
% of 33.3% 25.0% 20.0% 16.7% 7.0%
[Thousands of Dollars] 2019 Actual Pro forma --------------------------------------------
Income Statements Sales 2019 2020 2021 2022 2023 2024
Net Sales 100.0% 150.0 200.0 250.0 300.0 350.0 374.5
Cost of Goods Sold -50.0% -75.0 -100.0 -125.0 -150.0 -175.0 -187.3
Gross Profit 50.0% 75.0 100.0 125.0 150.0 175.0 187.3
SG&A Expenses -20.0% -30.0 -40.0 -50.0 -60.0 -70.0 -74.9
Depreciation -5.0% -7.5 -10.0 -12.5 -15.0 -17.5 -18.7
EBIT 25.0% 37.5 50.0 62.5 75.0 87.5 93.6
Interest -2.3% -3.5 -3.5 -3.5 -3.5 -3.5 -3.5
EBT 22.7% 34.0 46.5 59.0 71.5 84.0 90.1
Taxes (40% rate) -9.1% -13.6 -18.6 -23.6 -28.6 -33.6 -36.1
Net Income 13.6% 20.4 27.9 35.4 42.9 50.4 54.1

Required Net Working Capital:

Req Cash+Receivables+Inventories 33.3% 50.0 66.7 83.3 100.0 116.7 124.8
Minus: Payables+Accruals -16.7% -25.0 -33.3 -41.7 -50.0 -58.3 -62.4
Req Net Working Capital (RNWC) 25.0 33.3 41.7 50.0 58.3 62.4
Increase in RNWC 8.3 8.3 8.3 8.3 4.1
Fixed Assets Schedule:
Net Fixed Assets (NFA) 33.3% 50.0 66.6 83.3 100.0 116.7 124.8
Increase in NFA 16.7 16.7 16.7 16.7 8.2
Plus: Depreciation 10.0 12.5 15.0 17.5 18.7
CAPEX 26.7 29.2 31.7 34.2 26.9

Free Cash Flows to Equity:

Net Income 27.9 35.4 42.9 50.4 54.1
Plus: Depreciation 10.0 12.5 15.0 17.5 18.7
Minus: CAPEX -26.7 -29.2 -31.7 -34.2 -26.9
Minus: Increase in NWC -8.3 -8.3 -8.3 -8.3 -4.1
Operating Free Cash Flows 2.9 10.3 17.9 25.4 41.8

Terminal Value CF (r=.25, g =.07) 232.4

Total Free Cash Flows 2.9 10.3 17.9 257.8
PV of TFCF (25% Discount Rate) $123.7
Value Per Share (10,000 shares) $12.37

Part F:
Operating Free Cash Flows 2.9 10.3 17.9 25.4 41.8
Terminal Value CF (r=.20, g =.07) 321.7
Total Free Cash Flows 2.9 10.3 17.9 347.2
PV of TFCF (20% Discount Rate) $187.4
Value Per Share (10,000 shares) $18.74
SOFTTEC PRODUCTS COMPANY
Revised Case Results [Part G]:
Chapter 10 Mini Case Percent Change in Net Sales
% of 33.3% 25.0% 20.0% 16.7%
[Thousands of Dollars] 2019 Actual Pro forma --------------------------------------------
Income Statements Sales 2019 2020 2021 2022 2023
Net Sales 100.0% 150.0 200.0 250.0 300.0 350.0
Cost of Goods Sold -50.0% -75.0 -100.0 -125.0 -150.0 -175.0
Gross Profit 50.0% 75.0 100.0 125.0 150.0 175.0
SG&A Expenses -20.0% -30.0 -40.0 -50.0 -60.0 -70.0
Depreciation -5.0% -7.5 -10.0 -12.5 -15.0 -17.5
EBIT 25.0% 37.5 50.0 62.5 75.0 87.5
Interest -2.3% -3.5 -4.7 -5.8 -7.0 -8.2
EBT 22.7% 34.0 45.3 56.7 68.0 79.3
Taxes (40% rate) -9.1% -13.6 -18.1 -22.7 -27.2 -31.7
Net Income 13.6% 20.4 27.2 34.0 40.8 47.6

Required Net Working Capital:

Req Cash+Receivables+Inventories 33.3% 50.0 66.7 83.3 100.0 116.7
Minus: Payables+Accruals -16.7% -25.0 -33.3 -41.7 -50.0 -58.3
Req Net Working Capital (RNWC) 25.0 33.3 41.7 50.0 58.3
Increase in RNWC 8.3 8.3 8.3 8.3
Fixed Assets Schedule:
Net Fixed Assets (NFA) 33.3% 50.0 66.6 83.3 100.0 116.7
Increase in NFA 16.7 16.7 16.7 16.7
Plus: Depreciation 10.0 12.5 15.0 17.5
CAPEX 26.7 29.2 31.7 34.2

Long-Term Debt Financing:

Amount of Long-Term Debt 23.3% 35.0 46.7 58.3 70.0 81.7
Increase in Long-term Debt 11.7 11.7 11.7 11.7

Free Cash Flows to Equity:

Net Income 27.2 34.0 40.8 47.6
Plus: Depreciation 10.0 12.5 15.0 17.5
Minus: CAPEX -26.7 -29.2 -31.7 -34.2
Minus: Increase in NWC -8.3 -8.3 -8.3 -8.3
Plus: Increase in L-T Debt 11.7 11.7 11.7 11.7
Operating Free Cash Flows 13.9 20.6 27.5 34.3

Terminal Value CF (r=.25, g =.07) 246.7

Total Free Cash Flows 13.9 20.6 27.5 281.0
PV of TFCF (25% Discount Rate) $153.4
Value Per Share (10,000 shares) $15.34
 7.0%
---------------------
2024
374.5
-187.3
187.3
-74.9
-18.7
93.6
-8.7
84.9
-34.0
50.9

124.8
-62.4
62.4
4.1

124.8
8.2
18.7
26.9

87.4
5.7

50.9
18.7
-26.9
-4.1
5.7
44.4