Year FCFF Terminal Value

Present Value
1 ($893.81) ($792.33)
2 ($832.48) ($654.18)
3 ($953.76) ($664.40)
4 ($1,036.78) ($640.23)
5 ($999.05) ($546.89)
6 ($728.08) ($355.43)
7 ($250.97) ($109.89)
8 ($344.40) ($136.02)
9 ($127.69) ($45.73)
10 $318.13 $60,899.33 $19,986.47
$16,041.34
Valuing Options or Warrants when there is dilution
Enter the current stock price = $84.00
Enter the strike price on the option = 13.38
Enter the expiration of the option = 8.4
Enter the standard deviation in stock prices = 50.00% (volatility)
Enter the annualized dividend yield on stock = 0.00%
Enter the treasury bond rate = 6.50%
Enter the number of warrants (options) outstanding = 38
Enter the number of shares outstanding = 340.79

VALUING WARRANTS WHEN THERE IS DILUTION

Stock Price= 84 # Warrants issued= 38
Strike Price= 13.38 # Shares outstanding= 341
Adjusted S (DO NOT ENTER)= Err:522 T.Bond rate= 6.50%
Adjusted K (DO NOT ENTER)= 13.38 Variance= 0.2500
Expiration (in years) = 8.4 Annualized dividend yield= 0.00%
Div. Adj. interest rate= 6.50%

d1 = Err:522
N (d1) = Err:522

d2 = Err:522
N (d2) = Err:522

Value of the call = Err:522

Number of Options = 38
Value of Options = Err:522
 Value and Revenue Growth

120

100

80

60

40

20

0
41% 45% 50%
 Value per Share and EBITDA Margins

80

70

60

50

40 Value per Share

30

20

10

0
6% 8% 10% 12% 14%
Revenue Growth
Value per Share
41% 37.97
45% 61.43
50% 96.59

EBITDA/Sales Value per Share

6% 7.59
8% 22.67
10% 37.74
12% 52.81
14% 67.89
 General FCFF Discount Model

A General FCFF Valuation Model

An n-stage Model
This model is designed to value a firm, with changing margins, revenue growth,
and other parameters.

Assumptions
1. The firm is expected to grow at a higher growth rate in the first period.
2. The growth rate will drop at the end of the first period to the stable growth rate.
3. The free cashflow to equity is the correct measure of expected cashflows to stockholders.

The user has to define the following inputs:

1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Capital Spending, Depreciation and Working Capital needs during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Inputs for the cost of capital. (Cost of equity, Cost of debt, Weights on debt and equity)

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 General FCFF Discount Model

Inputs to the model

Current EBIT = ($410.00) (in currency)
Current Net Income = ($442.00) (in currency)
Current Dividends = $0.00 ( in currency)
Current Interest Expense = $74.00 (in currency)
Current Capital Spending $242.67 (in currency)
Current Depreciation = $30.67 (in currency)
Tax Rate on Income = 35.00% (in percent)
Current Revenues = $1,117.00 ( in currency)
Current Working Capital = ($110.50) (in currency)
Chg. Working Capital = ($63.00) (in currency)
Book Value of Debt = $348.68 ( in currency)
Book Value of Equity = $138.00 (in currency)
NOL carried forward = $1,500.00

Weights on Debt and Equity

Is the firm publicly traded ? Yes ( Yes or No)

If yes, enter the market price per share = $84.00 (in currency)
& Number of shares outstanding = 340.79 (in #)
& Market Value of Debt = $349.00 ( in currency)

If not publicly traded, do you want to use the book value debt ratio ? (Yes or No)
If no, enter the debt to capital ratio to be used = (in percent)

Enter length of extraordinary growth period = 10 (in years)

Costs of Components
Do you want to enter cost of equity directly? No (Yes or No)
If yes, enter the cost of equity = 15.35% (in percent)
If no, enter the inputs to the cost of equity
Beta of the stock = 1.6

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 General FCFF Discount Model

Riskfree rate= 6.50% (in percent)

Risk Premium= 4.00% (in percent)

Enter the cost of debt for cost of capital calculation 8.00% ( in percent)

Earnings Inputs
Please enter year-specific inputs for each of the following variables:
Year Growth Rate in Operating Expense Growth Rate in Growth Rate in Working Capital
Revenue as % of Revenue Capital Spending Depreciation as % of Revenue
1 150.00% 115% 75% 100% 3.00%
2 100.00% 102% 50% 75% 3.00%
3 75.00% 100% 30% 50% 3.00%
4 50.00% 99% 25% 30% 3.00%
5 30.00% 98% 20% 25% 3.00%
6 25.20% 96.40% 16% 20% 3.00%
7 20.40% 94.80% 11% 16% 3.00%
8 15.60% 93.20% 6% 11% 3.00%
9 10.80% 91.60% 6% 6% 3.00%
10 6.00% 90% 6% 6% 3.00%
Compounded Avg 43%
Enter growth rate in stable growth period 6.00% (in percent)
Enter operating expenses as % of Revenue in stable phase 90.00% (in percent)
Enter Working Capital as % of Revenue in stable phase 3.00% (in percent)

Will the beta change in the stable period? Yes (Yes or No)
If yes, enter the beta for stable period = 1.00

Do you want to change the debt ratio in the stable growth period? Yes (Yes or No)
If yes, enter the debt ratio for the stable growth period = 15% (in percent)

Will the cost of debt change in the stable period? Yes (Yes or No)
If yes, enter the new cost of debt = 8.00% ( in percent)

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 General FCFF Discount Model

Capital Spending and Depreciation in Stable growth period

Is capital spending to be offset by depreciation in stable period? No (Yes or No)
If no, enter capital expenditures as % of depreciation in steady state: 110% (in percent: > 100%)

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 General FCFF Discount Model

Output from the program

Cost of Equity = 12.90%
Equity/(Debt+Equity ) = 98.80%
After-tax Cost of debt = 5.20%
Debt/(Debt +Equity) = 1.20%
Cost of Capital = 12.81%

1 2 3 4 5

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 General FCFF Discount Model

Revenues $2,792.50 $5,585.00 $9,773.75 $14,660.63 $19,058.81

- COGS $3,211.38 $5,696.70 $9,773.75 $14,514.02 $18,677.64
- Depreciation $61.33 $107.33 $161.00 $209.30 $262.04
EBIT ($480.21) ($219.03) ($161.00) ($62.69) $119.13
- EBIT*t $0.00 $0.00 $0.00 $0.00 $0.00
EBIT (1-t) ($480.21) ($219.03) ($161.00) ($62.69) $119.13
+ Depreciation $61.33 $107.33 $161.00 $209.30 $262.04
- Capital Spending $424.67 $637.00 $828.10 $1,036.78 $1,248.28
- Chg. Working Capital $50.27 $83.78 $125.66 $146.61 $131.95
Free CF to Firm ($893.81) ($832.48) ($953.76) ($1,036.78) ($999.05)
Present Value ($792.33) ($654.18) ($664.40) ($640.23) ($546.89)
NOL $1,980.21 $2,199.24 $2,360.24 $2,422.94 $2,303.80
Index 0 0 0 0 0

Cost of Capital Computation

Tax Rate 0% 0% 0% 0% 0%
Beta 1.60 1.60 1.60 1.60 1.60
Cost of Equity 12.90% 12.90% 12.90% 12.90% 12.90%
Cost of Debt 5.20% 5.20% 5.20% 5.20% 5.20%
Debt Ratio 1.20% 1.20% 1.20% 1.20% 1.20%
Cost of Capital 12.81% 12.81% 12.81% 12.81% 12.81%
Cum. WACC 1.12807 1.27255 1.43553 1.61938 1.82678

Growth Rate in Stable Phase = 6.00%

FCFF in Stable Phase = $2,256.32
Cost of Equity in Stable Phase = 10.50%
Equity/ (Equity + Debt) = 85.00%
AT Cost of Debt in Stable Phase = 5.20%
Debt/ (Equity + Debt) = 15.00%
Cost of Capital in Stable Phase = 9.71%
Value at the end of growth phase = $60,899.33

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 General FCFF Discount Model

Present Value of FCFF in high growth phase = ($3,841.26)

Present Value of Terminal Value of Firm = $19,882.60
Value of the firm = $16,041.34
Market Value of Debt = $349.00
Market Value of Equity = $15,692.34
Value of Options Outstanding (See option worksheet) = Err:522
Value of Equity in Common Stock = Err:522
Value of Equity per Share = Err:522

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 General FCFF Discount Model

el

ns, revenue growth,

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General FCFF Discount Model

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cent: > 100%)

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6 7 8 9 10 Terminal Year

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 General FCFF Discount Model

$23,861.63 $28,729.41 $33,211.19 $36,798.00 $39,005.88 $41,346.24

$23,002.61 $27,235.48 $31,484.21 $34,295.74 $35,729.39 $37,211.61
$315.50 $364.72 $404.11 $428.35 $454.06 $481.30
$543.52 $1,129.21 $1,322.87 $2,073.91 $2,822.44 $3,653.32
$0.00 $0.00 $242.13 $725.87 $987.85 $1,278.66
$543.52 $1,129.21 $1,080.74 $1,348.04 $1,834.58 $2,374.66
$315.50 $364.72 $404.11 $428.35 $454.06 $481.30
$1,443.02 $1,598.86 $1,694.79 $1,796.48 $1,904.27 $529.43
$144.08 $146.03 $134.45 $107.60 $66.24 $70.21
($728.08) ($250.97) ($344.40) ($127.69) $318.13 $2,256.32
($355.43) ($109.89) ($136.02) ($45.73) $103.87
$1,760.28 $631.07 $0.00 $0.00 $0.00
0 0 0 0 1

0% 0% 18% 35% 35% 35%

1.48 1.36 1.24 1.12 1.00 1.00
12.42% 11.94% 11.46% 10.98% 10.50% 10.50%
5.20% 5.20% 5.20% 5.20% 5.20% 5.20%
3.96% 6.72% 9.48% 12.24% 15.00% 15.00%
12.13% 11.49% 10.87% 10.27% 9.71% 9.71%
2.04843 2.28373 2.53190 2.79198 3.06295

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General FCFF Discount Model

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