Last Year

Step by Step method to Value a Company 0

Step 1 Take Sales value for the latest reported period 4950
Step 2 Find the sales growth rate 10%
Step 3 Apply the sales growth rate to the last reported sales
Step 4 Find the operating profit margin
Step 5 Apply operating profit margin to sales
Step 6 Take the Tax rate
Step 7 Cashflow after tax
Step 8 Compute FC and WC Investment
Fixed Asset Investment
Working Capital Investment
Step 9 Free Cash Flow after deducting FC and WC Investment
Step 10 Look at the cost of Capital
Step 11 Use cost of Capital to arrive at discount factor
Step 12 Apply discount factor to Free Cash flow toarrive at PV
Step 13 Add Previous Year's Operating Value to arrive at Cumulative Value

For Continuing Value

Step 14 Takefree cashflow from Step 7
Step 15 Divide by WACC
Step 16 Use cost of Capital to arrive at discount factor
Step 17 Use Discount factor to arrive at PV of Continuing Value in Year 0 (Today)

For Shareholder Value

Step 18 Get Cumulative Value from Step 13
Step 19 Get Continuing Value from Step 17
Step 20 Add to get Business Value
Step 21 Value of Marketable securities
Step 22 Add to get Corporate Value
Step 23 External Debt and Obligations
Step 24 Shareholder Value in Year 0 (Today)
 If Planning
Period is

Course Notes Example

1 2 Class Example 7 Value Drivers

4950 4950 1 Sales Growth Rate 10%
10% 10% 2 Operating Profit Margin 20%
5445 5989.5 3 Cash Tax rate 40%
20% 20% 4 Fixed Capital Investment 22%
1089 1197.9 5 Working Capital Investment 33%
40% 40% 6 Planning Period 2
653.4 718.74 7 Cost of Capital 8%

-110 -121
-165 -181.5
378 416 Rappa Port Authority Case study
8% 8% 20x1 20x2 Growth %
0.926 0.857
350 357
350 707 Sales $4,500.00 $4,950.00 10%
If Planning COGS & Expenses ($3,616.00) ($3,960.00) 10%
Period is Cash Operating Profit $884.00 $990.00 12%
1 Year 2 Years Fixed Capital $1,800.00 $1,900.00 6%
653.4 718.74 Working Capital $1,500.00 $1,650.00 10%
8,168 8,984 Marketable Securities $500.00 $393.00 -21%
0.926 0.857 Ext Debt & Obligations(@BookVal) $900.00 $1,000.00 11%
7,563 7,703 Ext Debt & Obligations(@mktVal) $1,000.00 $1,200.00 20%
If Planning Capital & Reserves $2,900.00 $2,940.00 1%
Period is Number of Shares Issued 985.00 1,000.00 2%
1 Year 2 Years Share price at Year End $2.70 $2.60 -4%
350 707
7,563 7,703 Sales in the Most Recent Period $4,950.00
7,913 8,410
393 393
8,306 8,803
1,200 1,200
7,106 7,603