©Farid-joko-Laila DCF Model®. All rights reserved.

DCF Model

Assumptions
Worldwide Paper Financial Data Worldwide Paper Capital
Balance-Sheet
Accounts
Claims (in
millions dollars)
Liabilities
k Loan payable (LIBOR+1%) ###
Long Term Debt ###
Total Liabilities ###
Shareholder Equity
Common Equity ###
Retained Earnings ###
Total Common Equity ###
Total Liabilities & Eq###

Per-Share Data Cost of Equity (rs) CAPM

Share Outstanding (mil### Cost of

Retained
Earning rs
(Brigham 412)
= rRf+ bl*RPM
Book Value Pershare 5 ` Cost of Debt (rd)
Market Value of ### After tax cost
Equity of Debt A
Corporate
Bond Yield*(1-
Recent Market Value 24 WACC
per share
Market Value of ### Wd*Cost of
Equity Debt * (1-T)+
We* Cost of
Equity

Debt/Equity (D/E) 1.2

Other Information
Bond Rating A
Beta (bL) 1.1

Interest Rate based Januari 15th 2016

Bank Loan rates (LIBOR)
1 year 1.15%
Government Bond
1 year 0.49%
5 year 1.46%
10 year 2.04%
30 year 2.82%

Tax 40%
1-T 0.6
Inflation Rate Average in 6 years
Inflation Rate 2017 2.14% 2.27%
Inflation Rate 2018 2.00%
Inflation Rate 2019 2.73%
Inflation Rate 2020 2.27%
Inflation Rate 2021 2.23%
Inflation Rate 2022 2.23%
Worldwide Paper Capital Structure
Book Value Market Value
Weigh Weigh

### 55% ### 20%

### 45% ### 80%

### ### ### ###

Cost of Equity (rs) CAPM Approach Risk Free Rate (rRf) = 2.04%
10 year T Bond Rate
10.29% 10.29% Market Risk Premium (RPM) 7.5%
= rM-rRf or a different
between the return that
investors require on an
avarage stock and the risk-
Cost of Debt (rd) Beta Leverage
free rate 1.1
2.3% 2.3% Beta Unleverage = bL/ 0.64
(1+(1-T)*(D/E))

WACC

5.4% 8.5%

Market Risk Premium

Historical Av 6%
Corporate Bonds (10 year maturity)
Aaaa ###
Aaa ###
A ###
Baa ###
©Farid-joko-Laila DCF Model®. All rights reserved.
DCF Model

Replacement Analysis (For adding

capacity & lowering operating cost)
Y
Entry (2016) 2017
Investment Capital Outlay ### ###
Less: Change in NWC/Net $ 0 $613,600
Working Capital (10% Sales
Revenue)
Total Investment ### ###
Investment Recovery
Equipment Salvage value (tax
as ordinary income)
After tax salvage Value
Net Working Capital (full
Operating cash Flow recovery)
over the project's Lif 2016 2017
Sales ###
Operating saving/NEDO Net ###
Earning from Discountinued
Operations -> increase sales
revenue Brigham 482-483
Sales Revenue ###
Less: Cost of Good Sold (75% sales) ###
Less: SG & A (5% sales) $204,533
Less: Cash Operating Cost (10% sales) $409,067
Less: Depreciation straightline (6 years) ###
Total operating cost ###
EBIT (or operating income = ###
sales revenue-total op cost)
Taxes 40% ###
EBIT(1-T) (After tax project ###
operating income)
Add back Depreciation ###
EBIT(1-T) + DEP ###
Project Free Cash Flow ### $ 59,040
(= EBIT(1-T) + Dep
-CAPEX - NOWC)

$25,000,000

$20,000,000

$15,000,000

$10,000,000
 $25,000,000

$20,000,000

WACC book value 5.4% $15,000,000

NPV book value ###
$10,000,000
WACC market value 8.5%
NPV market value $ 8,877,247
$5,000,000

$-
2017 2018
 Years
2018 2019 2020 2021 2022

$ -

$ -
###
2018 2019 2020 2021 2022
### ### ### ### ###
### ### ### ### ###

### ### ### ### ###

### ### ### ### ###
$ 511,333 $ 522,924 $ 534,776 $ 534,776 ###
### ### ### ### ###
### ### ### ### ###
### ### ### ### ###
### ### ### ### ###

$ 640,800 $ 650,072 $ 659,555 $ 692,007 ###

$ 961,200 $ 975,108 $ 989,332 ### ###

### ### ### ### ###

### ### ### ### ###
### ### ### ### ###

Cash Flow
$25,000,000

$20,000,000

$15,000,000

$10,000,000
$25,000,000

$20,000,000

$15,000,000

$10,000,000

$5,000,000

$-
2017 2018 2019 2020 2021 2022
2017 $59,040
2018 ###
2019 ###

2020 ###
2021 ###
2022 ###
Replacement Analysis (Add capacity & lowering operating cost)

2016
Investment Capital Outlay $ 16,000,000
Net Working Capital (10% Sales Revenue) $ 0
Total Investment $ 16,000,000
Investment Recovery
Equipment Salvage value (tax as ordinary income)
After tax salvage Value
Net Working Capital (full recovery)
Operating cash Flow over the project's Life (Time= 1-6)
Sales
Operating saving/NEDO Net Earning from
Discountinued Operations -> increase sales
revenue Brigham 482-483

Sales Revenue
Cost of Good Sold (75% sales)
SG & A (5% sales)
Cash Operating Cost (10% sales)
Depreciation straightline (6 years)
Total operating cost
EBIT (or operating income = sales revenue-
total op cost)

Taxes 40%
EBIT(1-T) (After tax project operating
income)
Add back Depreciation
EBIT(1-T) + DEP
Project Free Cash Flow $ (16,000,000)
(= EBIT(1-T) + Dep
-CAPEX - NOWC)

WACC book value 5.4%

Inflation 2.3%
Real Discount Rate = ((1+wacc)/(1+inflation)-1 3.1%
NPV book value $ 15,673,747

WACC market value 8.5%

Inflation 2.3%
Real Discount Rate = ((1+wacc)/(1+inflation)-1 6.1%
NPV market value $ 11,270,463
 Years
2017 2018 2019 2020 2021 2022
$ 2,000,000
$ 600,000
$ 2,600,000

$ -
$ -
$ 18,000,000

$ 4,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000 $ 10,000,000

$ 2,000,000 $ 3,500,000 $ 3,500,000 $ 3,500,000 $ 3,500,000 $ 3,500,000

$ 6,000,000 $ 13,500,000 $ 13,500,000 $ 13,500,000 $ 13,500,000 $ 13,500,000

$ 3,000,000 $ 7,500,000 $ 7,500,000 $ 7,500,000 $ 7,500,000 $ 7,500,000
$ 200,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000 $ 500,000
$ 400,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000
$ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000
$ 6,532,000 $ 11,932,000 $ 11,932,000 $ 11,932,000 $ 11,932,000 $ 11,932,000
$ (532,000) $ 1,568,000 $ 1,568,000 $ 1,568,000 $ 1,568,000 $ 1,568,000

$ (212,800) $ 627,200 $ 627,200 $ 627,200 $ 627,200 $ 627,200

$ (319,200) $ 940,800 $ 940,800 $ 940,800 $ 940,800 $ 940,800
$ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000 $ 2,932,000
$ 2,612,800 $ 3,872,800 $ 3,872,800 $ 3,872,800 $ 3,872,800 $ 3,872,800
$ 12,800 $ 3,872,800 $ 3,872,800 $ 3,872,800 $ 3,872,800 $ 21,872,800
© Corporate Finance Institute®. All rights reserved.

DCF Model

Assumptions
Tax Rate 40% Cash Flow
Discount Rate/WACC 5% 50,000 $47,
$43,510
45,000 $41,501
40,000 $37,715
35,000
Transaction Date 12/31/2016 30,000
Fiscal Year End 12/30/2022 25,000
20,000 $17,747
Current Price 25.00
15,000
Shares Outstanding 20,000 10,000
Debt 30,000 5,000
Cash 239,550 -
43,281 43,646 44,012 44,377 44,7
Capex 15,000

Discounted Cash Flow Entry 2022 2023 2024 2025

Date 12/31/2016 6/30/2022 6/30/2023 6/30/2024 6/30/2025
Time Periods 0 1 2 3
Year Fraction 5.50 1.00 1.00 1.00
EBIT 47,814 51,095 55,861 58,693
Less: Cash Taxes 19,126 20,438 22,345 23,477
Plus: D&A 15,008 15,005 15,003 15,002
Less: Capex 15,000 15,000 15,000 15,000
Less: Changes in NWC 375 611 398 511
Unlevered FCF 28,322 30,051 33,122 34,707
(Entry)/Exit (290,450)
Transaction CF (290,450) 155,772 30,051 33,122 34,707

Intrinsic Value Market Value

Enterprise Value 553,681 Market Cap
Plus: Cash 239,550 Plus: Debt
Less: Debt 30,000 Less: Cash
Equity Value 763,230 Enterprise Value

Equity Value/Share 38.16 Equity Value/Share

Instructions
Step 1: Get EBIT and D&A from the income statement
Step 2: Calculate the net working capital
There are two ways to find NWC:
1. NWC = Current Assets (less cash) - Current Liabilities (less debt)
2. NWC = Accounts Receivable + Inventory - Accounts Payable
sh Flow
$47,008
$43,510
$41,501

44,012 44,377 44,742

2026 Exit Terminal Value

6/30/2026 6/30/2026 Perpetural Growth 691,153
4 EV/EBITDA -
1.00 Average 345,577
63,039
25,215
15,001
15,000
272
37,552
345,577
37,552 345,577

Rate of Return
500,000 Target Price Upside 53%
30,000 Internal Rate of Return (IRR) 10%
239,550
290,450 Market Value vs Intrinsic Value
Market Value 25.00
25.00 Upside 13.16
Intrinsic Value 38.16

This file is for educational purposes only. E&OE

 Corporate Finance Institute®
https://corporatefinanceinstitute.com/