INPUTS FOR VALUATION

Current Inputs
Enter the current revenues of the firm = $12,406
Enterr the current operating income of the firm = $855
Enter the current capital expenditures = $233
Enter the current dollar depreciation for the firm = $298
Enter the change in Working Capital in last year = $115
Enter the value of current debt outstanding = $-
Cash and Marketable Securities at the firm = $850
Value of equity options issued by the firm = $1,500
Enter the number of shares outstanding = 1,500.00

High Growth Period Your Inputs

Enter the growth rate in revenues for the next 5 years = 30.00%
Your current pre-tax operating margin is 6.89%
Enter the pre-tax operating margin you expect your firm to have in year 5 = 30.00% (Operating Expenses include depreciation: This is equal to (1-EBIT/Sales))

How much debt do you plan to use in financing investments? 0%

Enter the growth rate in capital expenditures & depreciation 30.00%
Enter working capital as a percent of revenues 7.50%
Enter the tax rate that you have on corporate income 36.00%
What beta do you want to use to calculate cost of equity = 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 = 6.00%

Enter the pre-tax operating margin in perpetuity = 25.00% Aswath Damodaran:
Yes or no. If yes, enter
the return on capital
that the firm will have
in stable growth. If no,
enter the cap ex as a
percent of depreciation.

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 Aswath Damodaran:
Yes or no. If yes, enter
Do you want to compute reinvestment from fundamentals? Yes the return on capital
that the firm will have
Return on capital in perpetuity for the firm = 12.00% Aswath Damodaran:
in stable growth. If no,
enter the cap ex as a If you want the firm to
Enter capital expenditures as a percent of depreciation in this period 200.00%
percent of depreciation. grow in perpetuity, this
How much debt do you plan to use in financing investments? 5.00% number should be
greater than 100%.
Enter interest rate of debt in stable period = 7.50%
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 30.00% 30.00% 30.00% 30.00% 30.00% 25.20% 20.40% 15.60% 10.80% 6.00%
Growth in Deprec'n 30.00% 30.00% 30.00% 30.00% 30.00% 25.20% 20.40% 15.60% 10.80% 6.00%
Revenues $12,406 $16,128 $20,966 $27,256 $35,433 $46,063 $57,670 $69,435 $80,267 $88,936 $94,272

COGS
% of Revenues 93.11% 88.49% 83.86% 79.24% 74.62% 70.00% 71.00% 72.00% 73.00% 74.00% 75.00%
- $ COGS $11,551 $14,271 $17,583 $21,599 $26,441 $32,244 $40,946 $49,993 $58,595 $65,813 $70,704
EBIT $855 $1,857 $3,383 $5,657 $8,992 $13,819 $16,724 $19,442 $21,672 $23,123 $23,568

Tax Rate 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%

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EBIT (1-t) $547 $1,188 $2,165 $3,621 $5,755 $8,844 $10,704 $12,443 $13,870 $14,799 $15,084
+ Depreciation $298 $387 $504 $655 $851 $1,106 $1,385 $1,668 $1,928 $2,136 $2,264
- Capital Expenditures $233 $303 $394 $512 $665 $865 $2,573 $4,281 $5,990 $7,698 $9,406

- Change in WC $115 $279 $363 $472 $613 $797 $871 $882 $812 $650 $400
= FCFF $497 $994 $1,912 $3,292 $5,327 $8,288 $8,645 $8,947 $8,996 $8,587 $7,542
Terminal Value (in '05) $129,724
COSTS OF EQUITY AND CAPITAL

1 2 3 4 5 6 7 8 9 10
Cost of Equity 13.38% 13.38% 13.38% 13.38% 13.38% 13.21% 13.05% 12.88% 12.72% 12.55%
Proportion of Equity 100.00% 100.00% 100.00% 100.00% 100.00% 99.00% 98.00% 97.00% 96.00% 95.00%
After-tax Cost of Debt 5.44% 5.44% 5.44% 5.44% 5.44% 5.31% 5.18% 5.06% 4.93% 4.80%

Proportion of Debt 0.00% 0.00% 0.00% 0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%
Cost of Capital 13.38% 13.38% 13.38% 13.38% 13.38% 13.13% 12.89% 12.65% 12.40% 12.16%
Cumulative WACC 113.38% 128.54% 145.73% 165.22% 187.32% 211.92% 239.23% 269.48% 302.91% 339.75%

Present Value $877 $1,488 $2,259 $3,224 $4,425 $4,079 $3,740 $3,338 $2,835 $40,402

FIRM VALUATION
Value of Firm $66,667

+ Cash and marketable securities = $850

- Value of Debt $-
Value of Equity $67,517
- Value of Equity options issued by firm $1,500

Value of Equity per Share $44.01

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Value of firm by year $66,667 $74,590 $82,654 $90,417 $97,183 $101,893 $106,628 $111,423 $116,517 $122,382
$ Value of Debt $- $- $- $- $- $1,019 $2,133 $3,343 $4,661 $6,119

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