Ceb Eva

Page 1 INPUTS FOR VALUATION Current Inputs Enter the current revenues of the firm = $435 Enter current capital invested in the firm = $603 { As a naïve estimate, you can use BV of debt + BV of Equity) Enter the current depreciation = $9 Enter the current capital expenditures for the firm = $16 Enter the change in Working Capital in last year$(170) = Enter the value of current debt outstanding = $Enter the number of shares outstanding = 39.84 High Growth Period

Your Inputs

Enter the growth rate in revenues for the next 5 years =

20.00%

What will all operating expenses be as a % of revenues in the fifth 75.00% year?(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% 10.00% 8.00% 38.00% 0.80

Enter the current long term bond rate =

5.00%

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 =

7.00%

Enter operating expenses as a % of revenues in stable period = 75.00% Enter capital expenditures as a percent of depreciation in this period 150.00% See capital expenditure worksheet (capex.xls) for details. How much debt do you plan to use in financing investments?

0.00%

Enter interest rate of debt in stable period =

0.00%

Page 1

Page 2

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

1.10 ESTIMATED CASHFLOWS

Base

1

2

3

4

5

6

7

8

9

10

Growth in Revenue

20.00%

20.00%

20.00%

20.00%

20.00%

17.40%

14.80%

12.20%

9.60%

7.00%

Growth in Deprec'n

10.00%

10.00%

10.00%

10.00%

10.00%

9.40%

8.80%

8.20%

7.60%

7.00%

Revenues

$461

$553

$664

$797

$956

$1,147

$1,347

$1,546

$1,735

$1,901

$2,034

Operating Expenses % of Revenues - $ Operating Expenses EBIT Tax Rate

EBIT (1-t) + Depreciation - Capital Expenditures - Change in WC = FCFF

69.70%

75.00%

75.00%

75.00%

75.00%

75.00%

$321

$384

$477

$581

$707

$860

$1,010

$1,160

$1,301

$1,426

$1,526

$140

$169

$187

$216

$249

$287

$337

$387

$434

$475

$509

38.00%

69.50%

38.00%

71.82%

38.00%

72.88%

38.00%

73.94%

38.00%

75.00%

38.00%

38.00%

38.00%

38.00%

38.00%

38.00%

$87

$105

$116

$134

$154

$178

$209

$240

$269

$295

$315

$9

$10

$11

$12

$13

$14

$15

$17

$18

$19

$21

$16

$17

$19

$21

$23

$25

$27

$28

$29

$30

$31

$(170) $250

$7

$9

$11

$13

$15

$16

$16

$15

$13

$11

$89

$99

$114

$131

$151

$182

$213

$243

$271

$294

Page 2

Page 3

Terminal Value (in '15)

$7,775 COSTS OF EQUITY AND CAPITAL 1

Cost of Equity

2

3

4

5

6

7

8

9

10

9.40%

9.40%

9.40%

9.40%

9.40%

9.73%

10.06%

10.39%

10.72%

11.05%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

After-tax Cost of Debt

5.27%

5.27%

5.27%

5.27%

5.27%

4.22%

3.16%

2.11%

1.05%

0.00%

Proportion of Debt

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

0.00%

Proportion of Equity

Cost of Capital Cumulative WACC

Present Value

9.40%

9.40%

9.40%

9.40%

9.40%

9.73%

10.06%

10.39%

10.72%

11.05%

109.40%

119.68%

130.93%

143.24%

156.71%

171.95%

189.25%

208.92%

231.31%

256.87%

$82

$82

$87

$92

$96

$106

$112

$116

$117

$3,141

FIRM VALUATION Value of Firm - Value of Debt Value of Equity Value of Equity per Share

$4,032 $$4,032 $101.20

2007 Value of Firm by year $ Value of Debt

$4,032 $-

2008 $4,321 $-

2009 $4,629 $-

2010 $4,950 $-

2011 $5,284 $-

Page 3

2012 $5,630 $-

2013 $5,996 $-

2014 $6,386 $-

2015 $6,807 $-

2016 $7,266 $-

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

1 $87

Cumulated WACC

3 $116 $58 $58

4 $134 $60 $74

$154 $62 $93

$44 $48 $57 $65 $3,627 $603 $(198) This reconciles the assumptions on stable growth, ROC and Capital I

$4,032

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

2 $105 $57 $48

9.40% 17.35% $603

$603

$603

$603 $8 $7 $618 109.40%

Page 4

9.40% 18.76% $618

$618 $9 $9 $636 119.68%

9.40% 21.07% $636

$636 $9 $11 $656 130.93%

9.40% 23.56% $656

$656 $10 $13 $679 143.24%

EVA Valuation 5

6

7

8

9

10

$178 $64 $114

$209 $69 $140

$240 $74 $166

$269 $79 $190

$295 $84 $210

$73

$81

$88

$91

$91

$315 $89 $226 $7,453 $2,989

owth, ROC and Capital Invested

9.40% 26.19% $679

$679 $11 $15 $706 156.71%

9.73% 29.58% $706

$706 $11 $16 $733 171.95%

10.06% 32.70% $733

$733 $11 $16 $760 189.25%

10.39% 35.39% $760

$760 $11 $15 $786 208.92%

Page 5

10.72% 37.50% $786

$786 $11 $13 $810 231.31%

11.05% 38.94% $810

$810 $10 $11 $831 256.87%

EVA Valuation Terminal Year $337 $36 $302

11.05% 104.93% $322 (Adjusted to reflect terminal ROC)

Page 6

Sheet4 High Growth Revenue Operating Margin No debt Tax Rate Cost of Capital

Revenue Operating Margin Gross Profit Tax % EBIT(1-t) Depreciation Change in Working Capital Capex FCFF Terminal Value in year 10

Transition Revenue Slow to 10% Operating Margin Increase to 35% No debt Tax rate 38%

20% 30% 38% 9.35%

Base Year Year 1 Year 2 461 553.2 30.00% 30.00% 138.3 165.96 38% 38% 85.75 102.9 9 9.9 $0 7.38 16 17.28 $79 88.14

Year 3 663.84 30.00% 199.15 38% 123.47 10.89 8.85 18.66 106.85

796.61 30.00% 238.98 38% 148.17 11.98 10.62 20.16 129.37

91.33

102.39

Present Value Calculations $78.75 Firm Value Equity Value Debt Value Shares Outstanding Per Share Value

80.6

$8,642.04 39.04 $221

Page 7

Sheet4

Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 955.93 1147.12 1307.71 1477.71 1655.04 1837.09 30.00% 30.50% 31% 32% 33% 34% 286.78 349.87 405.39 472.87 546.16 624.61 38% 38% 38% 38% 38% 38% 177.8 216.92 251.34 293.18 338.62 387.26 13.18 14.49 15.22 15.98 16.78 17.62 12.75 15.29 12.85 13.6 14.19 14.56 21.77 23.51 25.39 27.42 29.61 31.98 156.47 192.61 228.32 268.14 311.6 358.33

115.3

133.76

147.88

163.1

Page 8

175.55

188.59

Sheet4

Year 10 2020.8 35% 707.28 38% 438.51 18.5 14.7 34.54 407.77 14679.87

203.89 7160.91

Page 9