Build 

A Financial Model
An company has sales of $50 million growing at 25% YoY with EBITDA margins at 20%. It secure 6 (linear scaling
Yr-3=20, Yr-4=30). Capex required for normal growth of the firm 7.5% of JV sales). The model should use debt, re
grow the firm. The current d 60 days. New Capex should be done at current debt equity ratio. For current year i
rate for the company is 30%, Depreciation rate is 10%, Interest Expense Rate is 10% (depreci income on beginnin
Value the firm using both methods DCF and Relative. For D market risk premium is 7% and Beta of comparable c
Company goes in maturity st
the value of the firm in year 6 at PE of 15 ? What is the value of the firm today at 1 year forward
Formulae for Working Capital Line Items:
DOH Average Inventory / (COGS/365)
DSO Average Accounts Receivables / (Sales/365) Pay Days Average Trade Payables / (COGS/365)

s a JV in Year 3 with additional business of $20 million at EBITDA of 12.5% which linearly scales up to $50 million i
and Capex required for expansion at time of JV is $4 million (after JV year capex for JV revenue w ebt ratio of the
average cash conversion cycle of 90 days and payment terms with debtor and credi n, receivables = 8 mn, payable
retained earning = 9mn, Fixed Asset, Net & Gross = 15mn and Cash = 3 ation and interest to be calculated on aver
previous year) and Interest Income Rate is 5%(interst CF Valuation assume weights of equity and debt based on c
Risk free return in the economy is 7 age from year 7 onwards with growth at 5% forever. For relative valuation us
metric. What wou
PE 10 ?
Year-0 Year-1 Year-2 Year-3
Income Statement
Sales ### 62,500,000 78,125,000
y/y % growth
Sales - JV

Total Sales 62,500,000 78,125,000

COGS
EBITDA 12,500,000 15,625,000
EBITDA-JV - -
EBITDA-Total 12,500,000 15,625,000
Tax
PAT
Capex Schedule
Capex
Capex as % Sales
Capex - JV
Capex as % Sales JV
Capex Funding Debt
Equity - Retained Earning

Balance Sheet
Cash Inventory
Account Receivable PPE, Gross
Acc Dep

PPE, Net
Total Assets

Accounts Payable Debt

Retained Earnings

Depreciation EBIT

Interest Expense Interest Income

EBT

Total Capex
Checksum
 ns at 20%. It secure 6 (linear scaling implies Revenue
ales). The model should use debt, retained earnings to
debt equity ratio. For current year inventory = 6m Tax
e is 10% (depreci income on beginning of period cash).
mium is 7% and Beta of comparable company is 0.5.
ay at 1 year forward

verage Trade Payables / (COGS/365)

ch linearly scales up to $50 million i is 7.5% of sales

ex for JV revenue w ebt ratio of the firm is 2:1 with
credi n, receivables = 8 mn, payables = 5 mn and
nd interest to be calculated on average of current and
eights of equity and debt based on current book value.
5% forever. For relative valuation use P/E as valuation

97,656,250
20,000,000

117,656,250

19,531,250
2,500,000
22,031,250
 D/E DOH DSO
Pay Days

Cash Flow Statement

BOP Cash
EOP Cash
DCF Valuation
NOPAT = EBIT*(1-T)
Depreication Capex
Change in Working Capital FCFF
TerminalValue Total Cash Flows

Enterprise Value
Total Liabilities and Sh Equity
PAT
Dep
Change in Inv Change in AR Change in AP CFO

Capex CFI

Change in Debt CFF

Net Change in Cash

We Wd Ke Kd
WACC

Relative Valuation

PAT - Year1
PE
Value
Less: Debt Add: Cash
Intrinsic Equity Value
Less: Debt Add: Cash
Intrinsic Equity Value
Year-4 Year-5 Year-6

122,070,313 152,587,891 190,734,863

30,000,000 40,000,000 50,000,000

152,070,313 192,587,891 240,734,863

24,414,063 30,517,578 38,146,973
3,750,000 5,000,000 6,250,000

28,164,063 35,517,578 44,396,973

PAT - Year6 PE
Value

CAGR %