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Source: Casewriter.
2011 2012 2013
Sales 310
Operating expenses (excluding depreciation) 218
EBITDA 92
Depreciation 30
EBIT 62
Interest expenses 14
Profit before taxes 48
Taxes 19
Net profit 29
Cash 5
Accounts receivable 31
Inventories 66
Current assets 102
Net fixed assets 208
Total assets 310
Accounts payable and other accruals 35
Long-term debt 140
Equity 135
Total liability and equity 310
Growth Rate 6% 6%
Terminal Growth Rate 3%
Pre-Tax Operating Margin 20%
Operating Working Capital (As % of Sales) 20%
Industry Operating Working Capital (As % of Sales) 14%
Capital Expenditure 35 35 35
Depreciation 30 31 32
Effective Tax Rate 38%
Debt-to-Capital Ratio 20%
Equity-to-Capital Ratio 80%
After Tax Cost of Debt 6%
Cost of Equity 13.50%
WACC 12%
NWC 67 46 49
Sales 310 329 348
Sales Growth 6% 6%
Operating expenses (excluding depreciation) 70% of Sa 218 230 244
EBITDA 92 99 104
Depreciation (Grows at 1 Million Per Year) 30 31 32
EBIT 62 68 72
Interest expenses 14 14 14
EBT 48 54 58
Taxes 19 20 22
EAT 29 33 36
FCFF
EBIAT 43 47 50
Add: Depreciation 30 31 32
Less: Capex -35 -35 -35
Less: Change in NWC 0 21 -3
Operating Cash Flow 38 64 45
Terminal Value
Free Cash Flow for Firm 38 64 45
Firm Value 539
Less: Value of Debt 140
Value of Equity 399
FCFE
EBIT 62 68 72
Less: Interest (10% of Debt) 14 11.34 6.845
Less: Tax 18 21 25
EAT 30 35 41
Add: Depreciation 30 31 32
Less: Capex -35 -35 -35
Less: Change in NWC 0 21 -3
Less: Change in Debt -27 -45 -31
Operating Cash Flow for Equity -2 7 4
Terminal Value
Free Cash Flow for Firm 7 4
Firm Value 532
Less: Value of Debt 140
Value of Equity 392
5% 5%
35 35
33 34
51 54
366 384
5% 5%
256 269
110 115
33 34
77 81
14 14
63 67
24 26
39 42
53 56
33 34
-35 -35
-2 -3
48 52
596
48 648
77 81
3.729 3.72945048
28 29
45 48
33 34
-35 -35
-2 -3
0 0
41 44
436
41 481
37.29 37.2945048
0 0
37.29 37.2945048
Sales
EBITDA
EBIT
Net profit
Book value of equity
Number of shares outstanding (Million)
Share price (average over the year)
Ratio of equity to total capital at market value
Market Cap
Debt Value
Beta coefficient (equity beta or leveraged beta)
PE Multiple
EBIT Multiple
EBITDA Multiple
Sales Multiple
Using PE
Using EBIT Multiple
Using EBITDA Multiple
Using Sales Mutliple
Sales
Operating expenses (excluding depreciation)
EBITDA
Depreciation
EBIT
Interest expenses
Profit before taxes
Taxes
Net profit
SAC NEC Average
500 590
152 174
99 113
51 59
216 295
25 20
50 30
80% 80%
1250 600
312.5 150
1.30 1.30
310
218
92
30
62
14
48
19
29
EBITDA MultiplePE Mutliple
Nelson Acquisition of Belmon 5.2 11.5
EBITDA 92
EAT 29
Firm Value Equity Value
EBITDA 478.4 338.4
PE 473.5 333.5
Exhibit 2 Selected Financial Data (2004) for South Atlantic Corporation
(SAC) and Nelson Equipment Corporation (NEC)
SAC NEC
Sales $500 million $590 million
EBITDA $152 million $174 million
EBIT $99 million $113 million
Net profit $51 million $59 million
Book value of equity $216 million $295 million
Number of shares outstanding 25 million 20 million
Share price
(average over the year) $50 $30
Ratio of equity to total capital at market value 80% 80%
Beta coefficient
(equity beta or leveraged beta) 1.30 1.30
Source: Casewriter.
Exhibit 3 Selected Capital Markets Information as of
January 2005
Source: Casewriter.