In: Finance
Analysts expect that under new management the firm could increase it revenue and operating expenses by 12% next year 10%and the following year 7%. Analysts believe the marginal cost to be 6%, the Wacc 8% and the tax to be 20%.
Assumptions. You must adjust numeric value of each assumption as necessary to project cash flow, income, assets & liabilities, etc. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Valuation. Construct a valuation using a DCF analysis to calculate the Enterprise and Equity Values. Apply an EBITDA multiple of 7 to calculate TV. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commentary. Your commentary should focus on how much your would pay for this firm and why. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
Depreciation | 636.2 | 683.2 | 734.9 | 791.8 | 854.3 | ||
PPE | |||||||
Beg | 6,362.0 | 6,832.0 | 7,349.0 | 7,917.7 | 8,543.3 | ||
Additions | 1,106.2 | 1,200.2 | 1,303.6 | 1,417.4 | 1,542.4 | ||
Depreciation or Disposals | 636.2 | 683.2 | 734.9 | 791.8 | 854.3 | ||
End | 6,362.0 | 6,832.0 | 7,349.0 | 7,917.7 | 8,543.3 | 9,231.4 | |
Debt | |||||||
Beg | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | ||
Additions | - | - | - | - | - | ||
Reductions | - | - | - | - | - | ||
End | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | |
Interest Calculation | |||||||
Beg Debt Level | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | 4,224.0 | ||
Interest Rate | 0.7% | 0.7% | 0.7% | 0.7% | 0.7% | ||
30.1 | 30.1 | 30.1 | 30.1 | 30.1 | |||
Cash | |||||||
Beg | 1,750.0 | 8,326.8 | 15,576.9 | 23,567.7 | 32,373.3 | ||
Operating Cash Flow | 8,199.2 | 9,018.2 | 9,919.1 | 10,910.1 | 12,000.1 | ||
NWC | (516.2) | (567.8) | (624.7) | (687.0) | (755.8) | ||
Debt Borrowings | - | - | - | - | - | ||
Sources | 7,683.0 | 8,450.4 | 9,294.4 | 10,223.1 | 11,244.3 | ||
Dividends | - | - | - | - | - | ||
Capital Expenditures | 1,106.2 | 1,200.2 | 1,303.6 | 1,417.4 | 1,542.4 | ||
Debt Payments | |||||||
Uses | 1,106.2 | 1,200.2 | 1,303.6 | 1,417.4 | 1,542.4 | ||
End | 1750 | 8,326.8 | 15,576.9 | 23,567.7 | 32,373.3 | 42,075.3 |
Firm Name | Food N Pak | ||
Your Name | Webster University | ||
Initial Year | 2018 | ||
Receivables | % of Sales | 8.7% | |
Inventories | % of Sales | 10.2% | |
Payables | % of Sales | 6.1% | |
Other Liabilities | % of Sales | 1.8% | |
Cost of Revenue | % of Sales | 63.8% | |
SGA | % of Sales | 16.6% | |
Interest Rate | % of Debt | 0.7% | |
Tax Rate | % of EBT | 20.0% | |
Dividend | % of NI | 0.0% | |
Discount Rate | |||
Depreciation Life | Years | 10 | |
Capital Expenditures (Asset/Sales Ratio) | % of Chg Sales | 10.0% | |
Growth Rate | 1 | 10.0% | |
2 | 10.0% | ||
3 | 10.0% | ||
Terminal | 10.0% | ||
Non-recurring | % of Sales | 0.0% | |
Debt Growth | % Growth Rate | 0.0% | |
Debt Reduction | % of O/S Balance | 0.0% | |
Round | Num of places | 1 |
The question concet of EBITDA multiple approach , explain the concept of EV/ EBITDA should be 7.
EBITDA can be calculated as follows.(Bottom-Up Method)
The bottom up approach are the most suitable one as ,all the data is already worked out
New income statement with changes given in questions
2018 | 2019 | 2020 | 2021 | |
Total Revenue | $ 47,000 | $52,640.0 | $57,904.0 | $61,957.3 |
Cost of Revenue | $ (30,000) | $ (33,600) | $ (37,632) | $ (42,148) |
Gross Profit | $17,000.0 | $19,040.0 | $20,272.0 | $19,809.4 |
Operating Expenses | ||||
Depreciation | $ (900) | $ (1,008) | $ (1,109) | $ (1,186) |
S, G & A | $ (7,800) | $ (8,736) | $ (9,610) | $ (10,282) |
Non-recurring charge | $ (500) | $ (560) | $ (616) | $ (659) |
Operating Income | $7,800.0 | $8,736.0 | $8,937.6 | $7,681.6 |
Interest Expense | $ (335) | $ (30) | $ (30) | $ (30) |
Earnings before income taxes | $7,465.0 | $8,705.9 | $8,907.5 | $7,651.5 |
Income Taxes | $ (1,493) | $ (1,741) | $ (1,782) | $ (1,530) |
Net Income | $5,972.0 | $6,964.7 | $7,126.0 | $6,121.2 |
Calculation EBITD | ||||
2018 | 2019 | 2020 | 2021 | |
Net Income | $5,972.0 | $6,964.7 | $7,126.0 | $6,121.2 |
Tax | $ 1,493 | $ 1,741 | $ 1,782 | $ 1,530 |
Interset | $ 335 | $ 30 | $ 30 | $ 30 |
Depreciation | $ 900 | $ 1,008 | $ 1,109 | $ 1,186 |
EBITD | $8,700.0 | $9,744.0 | $10,046.4 | $8,868.0 |
Year EV (7 multiple) | $60,900.0 | $68,208.0 | $70,324.8 | $62,076.3 |
Discounted EBITD at 8% | $8,055.6 | $8,353.9 | $7,975.2 | $6,518.3 |
EV (7 Multiple of Discounted EDITD) | $216,320.31 |