FMVA Practice Exam Case Study #1

May 2021

Notes
This Excel model is for educational purposes only and should not be used for any other reason.
All content is Copyright material of CFI Education Inc.
https://corporatefinanceinstitute.com/

© 2021 CFI Education Inc.

All rights reserved.  The contents of this publication, including but not limited to all written material, content
No part of this publication may be modified, manipulated, reproduced, distributed, or transmitted in any form
without prior written permission of the publisher, except in the case of certain non-commercial uses permitt
for any other reason.

ed to all written material, content layout, images, formulas, and code, are protected under international copyright and trademark laws. 
ributed, or transmitted in any form by any means, including photocopying, recording, or other electronic or mechanical methods,
ain non-commercial uses permitted by copyright law.
 Strictly Confidential

emark laws. 
© Corporate Finance Institute. All rights reserved.
Model Inputs and Assumptions
All Figures in US$000's unless otherwise stated.

Model Inputs and Assumptions

General Assumptions
Transaction Date 6/15/2024
Forecast Start Date 1/1/2021
Fiscal Year-End 12/31/2021
Days Per Year 365

Income and Expense Forecast Assumptions (2021E)

Sales Growth
Gross Margin
SG&A Expense
Depreciation Expense
Capital Expenditures

Balance Sheet Forecast Assumptions (2021E)

Accounts Receivable Days Outstanding 36.0
Accounts Payable Days Outstanding 97.0

Valuation Assumptions
Tax Rate
EBITDA Exit Multiple 10.0x
Equity Risk Premium 8.5%
Interest Rate 5.5%
© Corporate Finance Institute. All rights reserved.
Historical and Forecast Financial Information
All Figures in US$000's unless otherwise stated.

2018A 2019A 2020A

Income Statement
Sales Revenue $50,000 $45,000 $48,000
Cost of Sales ($22,500) ($22,500) ($26,400)
Gross Profit $27,500 $22,500 $21,600

SG&A Expense ($3,750) ($3,375) ($3,600)

Depreciation Expense ($4,250) ($3,825) ($4,080)
Income Before Income Taxes $19,500 $15,300 $13,920
Income Taxes ($5,363) ($4,895) ($4,488)
Net Income $14,138 $10,405 $9,432

Balance Sheet
Assets
Cash & Cash Equivalents $36,388 $35,494 $34,773
Accounts Receivable $5,000 $4,438 $4,734
Total Current Assets $41,388 $39,933 $39,508

Property, Plant & Equipment $23,750 $34,925 $45,845

Total Assets $65,138 $74,858 $85,353

Liabilities
Accounts Payable $6,000 $5,315 $6,378
Total Current Liabilities $6,000 $5,315 $6,378

Long-Term Debt $0 $0 $0
Total Liabilities $6,000 $5,315 $6,378

Shareholders' Equity
Share Capital $45,000 $45,000 $45,000
Retained Earnings $14,138 $24,543 $33,975
Total Shareholders' Equity $59,138 $69,543 $78,975
Total Liabilities and Shareholders' Equity $65,138 $74,858 $85,353
Cash Flow Statement
Operating Activities
Net Income $14,138 $10,405 $9,432
Adjustments For:
Depreciation Expense $4,250 $3,825 $4,080
Changes in Non-Cash Working Capital $0 ($123) $767
Cash Generated From Operating Activities $18,388 $14,107 $14,279

Investing Activities
Additions to Property, Plant & Equipment ($27,000) ($15,000) ($15,000)
Cash (Used For) Investing Activities ($27,000) ($15,000) ($15,000)

Financing Activities
Issuance (Repayment) of Debt $0 $0 $0
Issuance (Buy-back) of Equity $45,000 $0 $0
Cash (Used For) Generated From Financing Activities $45,000 $0 $0

Cash (Used) Generated in the Period $36,388 ($893) ($721)

Cash & Cash Equivalents, Beginning of Period $0 $36,388 $35,494
Cash & Cash Equivalents, End of Period $36,388 $35,494 $34,773

Supporting Schedules
Change in Non-Cash Working Capital
Accounts Receivable $5,000 $4,438 $4,734
Accounts Payable $6,000 $5,315 $6,378
Total Non-Cash Working Capital ($1,000) ($877) ($1,644)
Change in Non-Cash Working Capital ($123) $767

Asset Continuity Schedule

PP&E, Opening Balance $1,000 $23,750 $34,925
Capital Expenditures $27,000 $15,000 $15,000
Depreciation Expense ($4,250) ($3,825) ($4,080)
PP&E, Ending Balance $23,750 $34,925 $45,845

Supplemental Information
EBITDA $23,750 $19,125 $18,000

Current Ratio
Cash Ratio
Margin Impact Ratio
Cash Turnover Ratio
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E

$49,200 $50,430 $51,439 $52,467 $53,516 $54,586 $56,726 $59,958

2029E 2030E
© Corporate Finance Institute. All rights reserved.
Valuation and Return Analysis
All Figures in US$000's unless otherwise stated.

DCF Analysis

Time Periods
Date
Date for NPV (Annual Cash Flows)
Year Fraction

EBITDA
Terminal Value

Unlevered Free Cash Flow

EBITDA
Depreciation
EBIT
Unlevered Taxes
Depreciation
Capital Expenditures
Change in Non-Cash Working Capital
Unlevered Free Cash Flow

Adjusted Unlevered Free Cash Flow

Terminal Value
Total Adjusted Unlevered Free Cash Flow $0

Net Present Value (NPV)

Present Value of Free Cash Flows
Present Value of Terminal Value
Total Net Present Value (NPV)
Add: Cash
Less: Debt
Equity Value

Investment Analysis
Date
Date for NPV (Annual Cash Flows)
Year Fraction

Unlevered Free Cash Flow

Adjusted Unlevered Free Cash Flow
Terminal Value
Total Adjusted Unlevered Free Cash Flow

Net Present Value (NPV)

Present Value of Free Cash Flows
Present Value of Terminal Value
Total Net Present Value (NPV)
Add: Cash
Less: Debt
Equity Value

Investor IRR
Investment Amount
Adjusted Unlevered Free Cash Flow
Investment Cash Flows
Investor IRR

Equity Investment 30.0%

Adjusted Unlevered Free Cash Flow
Investment Cash Flows
Equity IRR
2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E

$0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0 $0 $0 $0 $0

$0 $0 $0 $0 $0 $0 $0 $0

$0
 $0 $0 $0 $0 $0 $0

$50,000
$0
$50,000

$0 $0 $0 $0 $0 $0

$0

$0 $0 $0 $0 $0 $0
2029E 2030E

$0 $0

$0 $0

$0 $0
$0 $0

$0 $0

$0 $0
© Corporate Finance Institute. All rights reserved.
Weighted-Average Cost of Capital (WACC)
All Figures in US$000's unless otherwise stated.

Comparable Companies Beta

Unlevered
Company Levered Beta Debt Equity Debt / Equity Tax Rate Beta
Company A $550 $800 26.5% 1.25
Company B $200 $900 30.0% 0.98
Company C $355 $950 28.0% 1.15
Company D $100 $850 32.5% 0.85
Company E $300 $1,200 35.0% 1.03
Median #VALUE! #VALUE! 1.03
Company XYZ WACC Calculation

Capital Structure
Amount %
Current Debt $30,000
Current Equity $66,000
Total $96,000 0%
Debt / Equity

Cost of Debt
Cost of Debt
Tax Rate
After-Tax Cost of Debt 0.0%

Cost of Equity
Risk-Free Rate
Equity Risk Premium
Levered Beta
Cost of Equity 14.1%

WACC 0.0%