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INPUTS FOR VALUATION

Current Inputs
Enter the current revenues of the firm =
$ 12,406
Enter current capital invested in the firm =
$ 20,000 { As a nave estimate, you can use BV of debt + BV of Equity)
Enter the current depreciation =
$
233
Enter the current capital expenditures for the firm =$
298
Enter the change in Working Capital in last year = $
115
Enter the value of current debt outstanding =
$
Enter the number of shares outstanding =
1,500.00
High Growth Period
Enter the growth rate in revenues for the next 5 years =

Your Inputs
25.00%

What will all operating expenses be as a % of revenues in the fifth year?

70.00% (Operating expenses include depreciation: This is equal to (1-Pre-tax Operating Margin))
How much debt do you plan to use in financing investments?
Enter the growth rate in capital expenditures & depreciation
Enter working capital as a percent of revenues
Enter the tax rate that you have on corporate income
What beta do you want to use to calculate cost of equity =

0%
25.00%
7.50%
36.00%
1.25

Enter the current long term bond rate =

6.50%

Enter the market risk premium you want to use =

5.50%

Enter your cost of borrowing money =

8.50%

Stable Period
Enter the growth rate in revenues =
Enter operating expenses as a % of revenues in stable period =

6.00%
75.00%

Enter capital expenditures as a percent of depreciation in this period200.00% See capital expenditure worksheet (capex.xls) for details.
How much debt do you plan to use in financing investments?

5.00%

Enter interest rate of debt in stable period =

7.50%

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What beta do you want to use in the stable period =

1.10
ESTIMATED CASHFLOWS

Base

10

Growth in Revenue

25.00%

25.00%

25.00%

25.00%

25.00%

21.20%

17.40%

13.60%

9.80%

6.00%

Growth in Deprec'n

25.00%

25.00%

25.00%

25.00%

25.00%

21.20%

17.40%

13.60%

9.80%

6.00%

Revenues

$ 12,406

15,508

19,384

24,230

30,288

37,860

45,886

53,871

61,197

67,194

71,226

Operating Expenses
% of Revenues

70.00%

- $ Operating Expenses $
EBIT

Tax Rate

70.00%

8,684

3,722

36.00%

70.00%

10,855

4,652

36.00%

70.00%

13,569

5,815

36.00%

70.00%

16,961

7,269

36.00%

70.00%

71.00%

72.00%

73.00%

74.00%

75.00%

21,202

26,502

32,579

38,787

44,674

49,724

53,420

9,086

11,358

13,307

15,084

16,523

17,471

17,807

36.00%

36.00%

36.00%

36.00%

36.00%

36.00%

36.00%

EBIT (1-t)

2,382

2,977

3,722

4,652

5,815

7,269

8,517

9,654

10,575

11,181

11,396

+ Depreciation

233

291

364

455

569

711

862

1,012

1,149

1,262

1,338

- Capital Expenditures $

298

373

466

582

728

909

1,263

1,616

1,969

2,322

2,675

- Change in WC

115

233

291

363

454

568

602

599

549

450

302

= FCFF

2,202

2,664

3,329

4,162

5,202

6,503

7,514

8,451

9,206

9,671

9,756

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Terminal Value (in '05)

$ 167,813
COSTS OF EQUITY AND CAPITAL
1

Cost of Equity
Proportion of Equity
After-tax Cost of Debt
Proportion of Debt
Cost of Capital
Cumulative WACC

10

13.38%

13.38%

13.38%

13.38%

13.38%

13.21%

13.05%

12.88%

12.72%

12.55%

100.00%

100.00%

100.00%

100.00%

100.00%

99.00%

98.00%

97.00%

96.00%

95.00%

5.44%

5.44%

5.44%

5.44%

5.44%

5.31%

5.18%

5.06%

4.93%

4.80%

0.00%

0.00%

0.00%

0.00%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

13.38%

13.38%

13.38%

13.38%

13.38%

13.13%

12.89%

12.65%

12.40%

12.16%

113.38%

128.54%

145.73%

165.22%

187.32%

211.92%

239.23%

269.48%

302.91%

339.75%

Present Value

2,349

Value of Firm

80,367

- Value of Debt

Value of Equity

80,367

Value of Equity per Share

53.58

2,590

2,856

3,149

3,472

3,546

3,532

3,416

3,193

52,265

FIRM VALUATION

1995

1996

1997

Value of Firm by year

80,367

88,453

96,954

$ Value of Debt

1998

1999

2000

2001

2002

2003

2004

$ 105,760

$ 114,703

$ 123,542

$ 132,250

$ 140,844

$ 149,448

$ 158,314

1,235

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2,645

4,225

5,978

7,916

EVA Valuation

EBIT (1-t)
- WACC (CI)
EVA
Terminal EVA
PV
PV of EVA
+ Capital Invested
+ PV of Chg Capital in Yr 10
= Firm Value

$
$
$

Base
2,382

Cumulated WACC

1
2,977
2,675
302

$
$
$

2
3,722
2,717
1,005

$
$
$

3
4,652
2,769
1,883

$
$
$

4
5,815
2,835
2,980

$
$
$

5
7,269
2,917
4,352

267

782

1,292

1,804

2,323

60,463
20,000
(96) This reconciles the assumptions on stable growth, ROC and Capital Invested

80,367

WACC
ROC
Capital Invested
Calculation of Capital Invested
Initial
$
+ Net Cap Ex
+ Chg in WC
Ending
$

$
$
$

20,000

20,000

13.38%
14.89%
20,000 $

13.38%
18.32%
20,314 $

13.38%
22.47%
20,706 $

13.38%
27.44%
21,197 $

13.38%
33.33%
21,810

$
$
$
$

20,000
81
233
20,314

20,314
102
291
20,706

20,706
127
363
21,197

21,197
159
454
21,810

21,810
198
568
22,576

$
$
$
$

113.38%

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128.54%

$
$
$
$

145.73%

$
$
$
$

165.22%

$
$
$
$

187.32%

EVA Valuation

$
$
$

6
8,517
2,964
5,552

$
$
$

7
9,654
3,039
6,615

$
$
$

8
10,575
3,134
7,441

$
$
$

9
11,181
3,244
7,938

2,620

2,765

2,761

2,620

$
$
$
$
$

10
Terminal Year
11,396 $
12,080
3,364 $
3,524
8,032 $
8,556
138,838
43,229

apital Invested

13.13%
37.72%
22,576 $

12.89%
40.94%
23,579 $

12.65%
42.67%
24,782 $

12.40%
42.76%
26,151 $

12.16%
41.20%
27,661 $

$
$
$
$

22,576
401
602
23,579

23,579
604
599
24,782

24,782
820
549
26,151

26,151
1,060
450
27,661

27,661
1,338
302
29,301

211.92%

$
$
$
$

239.23%

$
$
$
$

269.48%

$
$
$
$

$
$
$
$

302.91%

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339.75%

12.16%
41.69%
28,975 (Adjusted to reflect terminal ROC)

EVA Valuation

Adjusted to reflect terminal ROC)

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