Professional Documents
Culture Documents
Sales growth
Current assets/Sales
Current liabilities/Sales
Net fixed assets/Sales
Costs of goods sold/Sales
Depreciation rate
Interest rate on debt
Interest paid on cash and marketable securities
Tax rate
Dividend payout ratio
Year
Income statement
Sales
Costs of goods sold
Interest payments on debt
Interest earned on cash and marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
10%
15%
8%
77%
50%
10%
10.00%
8.00%
40%
40%
0
1,000
(500)
(32)
6
(100)
374
(150)
225
(90)
135
1,100
(550)
(32)
9
(117)
410
(164)
246
(98)
148
1,210
(605)
(32)
14
(137)
450
(180)
270
(108)
162
1,331
(666)
(32)
20
(161)
492
(197)
295
(118)
177
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
144
165
213
182
289
200
1,070
(300)
770
1,000
1,264
(417)
847
1,156
1,486
(554)
932
1,326
1,740
(715)
1,025
1,513
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
298
1,156
97
320
450
460
1,326
106
320
450
637
1,513
Year
0
Free cash flow calculation
Profit after tax
Add back depreciation
Subtract increase in current assets
Add back increase in current liabilities
Subtract increase in fixed assets at cost
Add back after-tax interest on debt
Subtract after-tax interest on cash and+A14 mkt. securities
Free cash flow
246
117
(15)
8
(194)
19
(5)
176
270
137
(17)
9
(222)
19
(9)
188
295
161
(18)
10
(254)
19
(12)
201
246
270
295
117
137
161
(15)
8
356
(17)
9
400
(18)
10
448
(194)
0
0
(194)
(222)
0
0
(222)
(254)
0
0
(254)
0
0
(98)
(98)
0
0
(108)
(108)
0
0
(118)
(118)
64
64
70
70
76
76
1,464
(732)
(32)
26
(189)
538
(215)
323
(129)
194
1,611
(805)
(32)
33
(220)
587
(235)
352
(141)
211
371
220
459
242
<-<-<-<-<-<-<-<-<-<--
=F15*(1+$B$2)
=-G15*$B$6
=-$B$8*(F36+G36)/2
=$B$9*(F27+G27)/2
=-$B$7*(G30+F30)/2
=SUM(G15:G19)
=-G20*$B$10
=G21+G20
=-$B$11*G22
=G23+G22
<-- =G39-G28-G32
<-- =G15*$B$3
2,031
(904)
1,127
1,718
2,364
(1,124)
1,240
1,941
<-<-<-<--
=G32-G31
=F31+G19
=G15*$B$5
=G32+G28+G27
117
320
450
830
1,718
129
320
450
1,042
1,941
<-<-<-<-<--
=G15*$B$4
=F36
=F37
=F38+G24
=SUM(G35:G38)
5
<-<-<-<-<-<-<-<--
=G22
=-G19
=-(G28-F28)
=G35-F35
=-(G30-F30)
=-(1-$B$10)*G17
=-(1-$B$10)*G18
=SUM(G44:G50)
323
189
(20)
11
(291)
19
(16)
214
352
220
(22)
12
(333)
19
(20)
228
352
<-- =G22
189
220
<-- =-G19
(20)
11
502
(291)
0
0
(291)
(333)
0
0
(333)
<-- =-(G30-F30)
<-- Not in our model
<-- Not in our model
<-- =SUM(G63:G65)
0
0
(129)
(129)
0
0
(141)
(141)
<-<-<-<--
82
82
88
88
=G36-F36
=G37-F37
=G23
=SUM(G69:G71)
<-- =G72+G66+G60
<-- =G27-F27
Sales growth
10%
Current assets/Sales
15%
Current liabilities/Sales
8%
Net fixed assets/Sales
77%
Costs of goods sold/Sales
50%
Depreciation rate
10%
Interest rate on debt
10.00%
Interest paid on cash and marketable securities8.00%
Tax rate
40%
Dividend payout ratio
40%
Year
0
Income statement
Sales
1,000
Costs of goods sold
(770)
Interest payments on debt
49
Interest earned on cash and marketable securities 8
Depreciation
(100)
Profit before tax
187
Taxes
(15)
Profit after tax
172
Dividends
(69)
Retained earnings
103
1,000
(770)
49
9
(253)
35
(3)
32
(13)
19
1,000
(770)
49
6
(422)
(137)
11
(126)
50
(76)
1,000
(770)
49
(10)
(704)
(434)
35
(400)
160
(240)
1,000
(770)
49
(48)
(1,173)
(941)
75
(866)
346
(520)
1,000
(770)
49
(123)
(1,955)
(1,799)
144
(1,655)
662
(993)
(216)
100
(736)
100
(1,729)
100
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
100
99
100
23
100
380
(300)
80
260
633
(553)
80
279
1,056
(976)
80
203
1,759
(1,679)
80
(36)
2,932
(2,852)
80
(556)
4,887
(4,807)
80
(1,549)
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
150
(490)
450
150
260
150
(490)
450
169
279
150
(490)
450
93
203
150
(490)
450
(146)
(36)
150
(490)
450
(666)
(556)
150
(490)
450
(1,659)
(1,549)
Year
Free cash flow calculation
Profit after tax
2
32
(126)
3
(400)
4
(866)
5
(1655)
422
0
0
(422)
(45)
(6)
(177)
704
0
0
(704)
(45)
9
(436)
1173
0
0
(1173)
(45)
44
(867)
1955
0
0
(1955)
(45)
113
(1587)
32
253
(126)
422
(400)
704
(866)
1,173
285
296
304
307
(253)
0
0
(253)
(422)
0
0
(422)
(704)
0
0
(704)
(1,173)
0
0
(1,173)
(1,955)
0
0
(1,955)
0
0
(13)
(13)
0
0
50
50
0
0
160
160
0
0
346
346
0
0
662
662
19
19
(76)
(76)
(240)
(240)
(520)
(520)
(993)
(993)
(1,655)
1,955
300
<-<-<-<-<-<-<-<-<-<--
=F16*(1+$B$2)
=-G16*$B$6
=-$B$8*(F37+G37)/2
=$B$9*(F28+G28)/2
=-$B$7*(G31+F31)/2
=SUM(G16:G20)
=-G21*$B$10
=G22+G21
=-$B$11*G23
=G24+G23
<-- =G40-G29-G33
<-- =G16*$B$3
<-<-<-<--
=G33-G32
=F32+G20
=G16*$B$5
=G33+G29+G28
<-<-<-<-<--
=G16*$B$4
=F37
=F38
=F39+G25
=SUM(G36:G39)
<-- =G23
<-<-<-<-<-<-<--
=-G20
=-(G29-F29)
=G36-F36
=-(G31-F31)
=-(1-$B$10)*G18
=-(1-$B$10)*G19
=SUM(G45:G51)
ASH BALANCES
<-- =G23
<-- =-G20
<-- =-(G29-F29)
<-- =G36-F36
<-- =SUM(G56:G60)
<-- =-(G31-F31)
<-- Not in our model
<-- Not in our model
<-- =SUM(G64:G66)
<-<-<-<--
=G37-F37
=G38-F38
=G24
=SUM(G70:G72)
<-- =G73+G67+G61
<-- =G28-F28
EXERCISE 2
Sales growth
Current assets/Sales
Current liabilities/Sales
Net fixed assets/Sales
Costs of goods sold/Sales
Sales, general and administrative expenses
Depreciation rate
Interest rate on debt
Interest paid on cash & marketable securities
Tax rate
Dividend payout ratio
Year
Income statement
Sales
Costs of goods sold
SG&A
Interest payments on debt
Interest earned on cash & marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
The model of section 3.2 includes cost of goods sold but not selling, general,
and administrative (SG&A) expenses. Suppose that the firm has $200 of
these expenses each year, irrespective of the level of sales. a. Change the
model to accommodate this new assumption. Show the resulting profit and
loss statements, balance sheets, free cash flows, and valuation. b. Create a
data table in which you show the sensitivity of the equity value to the level
of SG&A. Let SG&A vary from 0 to $500 per year.
10%
15%
8%
77%
50%
200 <-- Added
10%
10.00%
8.00%
40%
40%
0
1,000
(500)
(32)
6
(100)
374
(150)
225
(90)
135
1,100
(550)
(200)
(32)
6
(117)
207
(83)
124
(50)
75
1,210
(605)
(200)
(32)
5
(137)
241
(96)
145
(58)
87
1,331
(666)
(200)
(32)
5
(161)
277
(111)
166
(67)
100
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
71
165
65
182
63
200
1,070
(300)
770
1,000
1,264
(417)
847
1,083
1,486
(554)
932
1,178
1,740
(715)
1,025
1,288
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
225
1,083
97
320
450
311
1,178
106
320
450
411
1,288
Year
Free cash flow calculation
124
117
(15)
8
(194)
19
(4)
56
145
137
(17)
9
(222)
19
(3)
68
166
161
(18)
10
(254)
19
(3)
81
20%
0
NPV of row 61
Add in initial (year 0) cash and mkt. securities
Enterprise value
Subtract out value of firm's debt today
Equity value
56
68
81
56
68
81
709
-240 <-- =-B37+B28
469
20%
0
NPV of row 81
Add in initial (year 0) cash and mkt. securities
Enterprise value
Subtract out value of firm's debt today
Equity value
56
68
81
56
68
81
0
50
100
150
200
250
Equit
77
-190
-457
-724
-991
-1,257
-1,524
610
0
50
100
150
200
250
300
350
400
450
500
550
600
0%
1,028
848
668
488
308
128
nmf
nmf
nmf
nmf
nmf
nmf
nmf
Value
300
350
400
450
500
550
600
1,500
1,000
500
0
-500 0
-1,000
-1,500
-2,000
3%
1,143
947
752
557
362
166
nmf
nmf
nmf
nmf
nmf
nmf
nmf
6%
1,306
1,089
872
655
438
220
3
nmf
nmf
nmf
nmf
nmf
nmf
1,464
(732)
(200)
(32)
5
(189)
317
(127)
190
(76)
114
1,611
(805)
(200)
(32)
5
(220)
359
(144)
215
(86)
129
65
220
72
242
2,031
(904)
1,127
1,412
2,364
(1,124)
1,240
1,553
117
320
450
525
1,412
129
320
450
654
1,553
190
189
(20)
11
(291)
19
(3)
94
215
220
(22)
12
(333)
19
(3)
108
5
94
94
108
1,191 <-- =G59*(1+B3)/(B56-B3)
1,300
5
94
94
108
1,191 <-- =G72*(1+B3)/(B69-B3)
1,300
100
200
300
400
500
SG&A
9%
1,559
1,308
1,057
806
555
304
53
nmf
nmf
nmf
nmf
nmf
nmf
12%
2,002
1,692
1,382
1,071
761
451
141
nmf
nmf
nmf
nmf
nmf
nmf
15%
2,976
2,536
2,095
1,655
1,214
774
333
nmf
nmf
nmf
nmf
nmf
nmf
600
EXERCISE 3
The model of section 3.2 includes cost of goods sold but not selling, general, a
(SG&A) expenses. Suppose that the firm has $200 of these expenses each yea
level of sales. a. Change the model to accommodate this new assumption. Sho
and loss statements, balance sheets, free cash flows, and valuation. b. Create a
show the sensitivity of the equity value to the level of SG&A. Let SG&A vary
year.
Sales growth
Current assets/Sales
Current liabilities/Sales
Fixed assets at cost/Sales
Costs of goods sold/Sales
Depreciation rate
Interest rate on debt
Interest paid on cash & marketable securities
Tax rate
Dividend payout ratio
10%
15%
8%
100%
50%
10%
10.00%
8.00%
40%
40%
Year
Income statement
Sales
Costs of goods sold
Interest payments on debt
Interest earned on cash & marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
1,000
(500)
(32)
6
(100)
374
(150)
225
(90)
135
1,100
(550)
(32)
(18)
(109)
392
(157)
235
(94)
141
1,210
(605)
(32)
(45)
(116)
412
(165)
247
(99)
148
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
(524)
165
(609)
182
1,070
(300)
770
1,000
1,100
(409)
1,509
1,149
1,210
(524)
1,734
1,306
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
291
1,149
97
320
450
439
1,306
Year
Free cash flow calculation
Profit after tax
Add back depreciation
2
235
109
247
116
(15)
8
(30)
19
11
336
(17)
9
(110)
19
27
292
20%
0
NPV of row 61
Add in initial (year 0) cash and mkt. securities
Enterprise value
Subtract out value of firm's debt today
Equity value
2
336
292
336
292
2,710
-240 <-- =-B36+B27
2,470
20%
0
2
336
292
336
292
Growth
0%
2%
4%
6%
8%
10%
12%
14%
16%
3,581
4,531
6,431
<-- =IF(B75<=B2,"nmf",B86)
WACC
3,011.40
0%
2%
4%
6%
8%
10%
12%
14%
16%
10%
3,571.40
4,300.15
5,514.73
7,943.90
15,231.40
nmf
nmf
nmf
nmf
12%
3,004.73
3,471.40
4,171.40
5,338.07
7,671.40
14,671.40
nmf
nmf
nmf
1,331
(666)
(32)
(52)
(127)
454
(182)
272
(109)
163
1,464
(732)
(32)
(60)
(140)
500
(200)
300
(120)
180
1,611
(805)
(32)
(69)
(154)
551
(220)
330
(132)
198
(702)
200
(805)
220
(917)
242
1,331
(651)
1,982
1,479
1,464
(791)
2,255
1,670
1,611
(945)
2,555
1,880
106
320
450
603
1,479
117
320
450
783
1,670
129
320
450
981
1,880
4
272
127
5
300
140
330
154
(18)
10
(121)
19
31
321
(20)
11
(133)
19
36
353
321
353
321
353
(22)
12
(146)
19
41
388
388
4,268 <-- =G58*(1+B2)/(B55-B2)
4,656
321
353
321
353
388
4,268 <-- =G78*(1+B2)/(B75-B2)
4,656
G80)*(1+B75)
2,000
0
0%
5%
14%
16%
2,599.97
2,296.40
2,918.90
2,524.26
3,365.40
2,828.07
4,035.15
3,253.40
5,151.40
3,891.40
7,383.90
4,954.73
14,081.40
7,081.40
nmf
13,461.40
nmf
nmf
10%
18%
2,060.29
2,228.28
2,444.26
2,732.23
3,135.40
3,740.15
4,748.07
6,763.90
12,811.40
15%
20%
1,871.40
1,998.07
2,156.40
2,359.97
2,631.40
3,011.40
3,581.40
4,531.40
6,431.40
22%
1,716.85
1,813.90
1,932.51
2,080.78
2,271.40
2,525.57
2,881.40
3,415.15
4,304.73
20%
24%
1,588.07
1,663.22
1,753.40
1,863.62
2,001.40
2,178.54
2,414.73
2,745.40
3,241.40
26%
1,479.09
1,537.65
1,606.85
1,689.90
1,791.40
1,918.28
2,081.40
2,298.90
2,603.40
Sales growth
Current assets/Sales
Current liabilities/Sales
Costs of goods sold/Sales
Depreciation rate
Interest rate on debt
Interest paid on cash & marketable securities
Tax rate
Dividend payout ratio
Year
Income statement
Sales
Costs of goods sold
Interest payments on debt
Interest earned on cash & marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
Referring again to the model of section 3.2, suppose that the fixed
the following step
function:
Incorporate this function into the model.
10%
15%
8%
50%
10%
10.00%
8.00%
40%
40%
0
1,000
(500)
(32)
6
(100)
374
(150)
224
(90)
135
1,100
(550)
(32)
15
(109)
425
(170)
255
(102)
153
1,210
(605)
(32)
31
(115)
489
(196)
293
(117)
176
1,331
(666)
(32)
47
(126)
554
(222)
332
(133)
199
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
304
165
479
182
688
200
1,070
(300)
770
1,000
1,100
(409)
692
1,161
1,209
(524)
685
1,346
1,318
(650)
668
1,555
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
303
1,161
97
320
450
479
1,346
106
320
450
678
1,555
Year
Free cash flow calculation
Profit after tax
Add back depreciation
Subtract increase in current assets
255
109
(15)
293
115
(17)
332
126
(18)
8
(30)
19
(9)
336
9
(109)
19
(19)
292
10
(109)
19
(28)
332
20%
0
336
292
332
336
292
332
2,858
-240 <-- =-B37+B28
2,618
20%
0
336
292
332
336
292
332
1,464
(732)
(32)
65
(137)
627
(251)
376
(151)
226
1,611
(805)
(32)
85
(149)
710
(284)
426
(170)
255
928
220
1,205
242
1,431
(788)
644
1,791
117
320
450
904
1,791
129
320
450
1,160
2,058
5
376
137
(20)
426
149
(22)
11
(113)
19
(39)
372
12
(117)
19
(51)
415
5
372
372
415
4,569 <-- =G59*(1+B3)/(B56-B3)
4,984
5
372
372
415
4,569 <-- =G72*(1+B3)/(B69-B3)
4,984
+0.8*(G14-1400)))
20%
20%
8%
80%
50%
10%
10.00%
8.00%
40%
0.25
1,200
16%
0
1,000
1,200
(600)
(47)
3
(124)
432
(173)
259
(300)
(41)
1,440
(720)
(68)
(156)
496
(198)
298
(348)
(50)
1,728
(864)
(98)
(194)
572
(229)
343
(404)
(61)
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
200
240
288
346
1,100
(300)
800
1,080
1,384
(424)
960
1,200
1,732
(580)
1,152
1,440
2,157
(774)
1,382
1,728
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
400
450
150
1,080
96
545
450
109
1,200
115
816
450
59
1,440
138
1,142
450
(2)
1,728
Year
Free cash flow calculation
Profit after tax
Add back depreciation
Subtract increase in current assets
Add back increase in current liabilities
Subtract increase in fixed assets at cost
Add back after-tax interest on debt
259
124
(40)
16
(284)
28
298
156
(48)
19
(348)
41
343
194
(58)
23
(425)
59
(2)
101
Part b:
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
0
118
0
137
SHARE BASIS
2,074
(1,037)
(134)
(242)
662
(265)
397
(468)
(71)
2,488
(1,244)
(176)
(299)
769
(308)
461
(543) <-- =-$B$12*$B$11*(1+$B$13)^(G15-1)
(82)
415
498
2,675
(1,016)
1,659
2,074
3,306
(1,315)
1,991
2,488
166
1,531
450
(73)
2,074
199
1,994
450
(155)
2,488
397
242
(69)
28
(518)
80
461
299
(83)
33
(631)
106
0
159
0
186
10%
15%
8%
77%
50%
10%
10.00%
8.00%
40%
40%
0
1,000
(500)
(32)
6
(100)
374
(150)
225
(90)
135
1,100
(550)
(32)
9
(117)
410
(164)
246
(98)
148
1,210
(605)
(32)
14
(137)
450
(180)
270
(108)
162
1,331
(666)
(32)
20
(161)
492
(197)
295
(118)
177
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
144
165
213
182
289
200
1,070
(300)
770
1,000
1,264
(417)
847
1,156
1,486
(554)
932
1,326
1,740
(715)
1,025
1,513
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
298
1,156
97
320
450
460
1,326
106
320
450
637
1,513
Year
Free cash flow calculation
Profit after tax
Add back depreciation
Subtract increase in current assets
Add back increase in current liabilities
Subtract increase in fixed assets at cost
Add back after-tax interest on debt
Subtract after-tax interest on cash & mkt. securities
Free cash flow
246
117
(15)
8
(194)
19
(5)
176
270
137
(17)
9
(222)
19
(9)
188
295
161
(18)
10
(254)
19
(12)
201
20%
0
176
188
201
176
188
201
1,317
-240 <-- =-B36+B27
1,077
20%
0
176
188
201
176
188
201
Growth
0%
2%
4%
6%
8%
10%
12%
14%
16%
4,000
3,500
3,000
2,500
2,000
1,500
1,000
1,340.03
0%
2%
4%
6%
8%
10%
12%
14%
16%
WACC
10%
2,030.04
2,458.87
3,173.58
4,603.01
8,891.30
nmf
nmf
nmf
nmf
12%
1,696.78
1,970.59
2,381.29
3,065.80
4,434.82
8,541.87
nmf
nmf
nmf
14%
1,458.43
1,644.72
1,905.52
2,296.72
2,948.73
4,252.74
8,164.77
nmf
nmf
AT BOOK VALUE
1,464
(732)
(32)
26
(189)
538
(215)
323
(129)
194
1,611
(805)
(32)
33
(220)
587
(235)
352
(141)
211
371
220
459
242
2,031
(904)
1,127
1,718
2,364
(1,124)
1,240
1,941
117
320
450
830
1,718
129
320
450
1,042
1,941
323
189
(20)
11
(291)
19
(16)
214
352
220
(22)
12
(333)
19
(20)
228
5
214
228
1,812 <-- =SUM(G36:G38)
2,040
214
5
214
228
1,812 <-- =SUM(G36:G38)
2,040
214
4,000 Sales
3,500
3,000
2,500
2,000
1,500
1,000
500
0
0%
2%
4%
6%
8%
0%
16%
1,279.41
1,411.68
1,588.03
1,834.92
2,205.27
2,822.51
4,056.99
7,760.42
nmf
2%
4%
6%
18%
1,139.96
1,236.67
1,361.01
1,526.79
1,758.89
2,107.03
2,687.27
3,847.75
7,329.19
8%
20%
1,028.23
1,100.37
1,190.54
1,306.48
1,461.06
1,677.48
2,002.10
2,543.14
3,625.21
22%
936.67
991.18
1,057.80
1,141.07
1,248.14
1,390.90
1,590.76
1,890.55
2,390.21
24%
860.24
901.71
951.47
1,012.28
1,088.30
1,186.04
1,316.36
1,498.80
1,772.47
26%
795.47
827.04
864.35
909.13
963.85
1,032.26
1,120.21
1,237.48
1,401.65
10%
15%
8%
77%
50%
10%
10.00%
8.00%
40%
40%
0
1,000
(500)
(32)
6
(100)
374
(150)
225
(90)
135
1,100
(550)
(32)
9
(117)
410
(164)
246
(98)
148
1,210
(605)
(32)
14
(137)
450
(180)
270
(108)
162
1,331
(666)
(32)
20
(161)
492
(197)
295
(118)
177
Balance sheet
Cash and marketable securities
Current assets
Fixed assets
At cost
Depreciation
Net fixed assets
Total assets
80
150
144
165
213
182
289
200
1,070
(300)
770
1,000
1,264
(417)
847
1,156
1,486
(554)
932
1,326
1,740
(715)
1,025
1,513
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
80
320
450
150
1,000
88
320
450
298
1,156
97
320
450
460
1,326
106
320
450
637
1,513
Year
Free cash flow calculation
Profit after tax
Add back depreciation
Subtract increase in current assets
Add back increase in current liabilities
Subtract increase in fixed assets at cost
Add back after-tax interest on debt
Subtract after-tax interest on cash & mkt. securities
Free cash flow
246
117
(15)
8
(194)
19
(5)
176
270
137
(17)
9
(222)
19
(9)
188
295
161
(18)
10
(254)
19
(12)
201
EBITDA Calculation
Profit before taxes
Add back depreciation
Add back net interest
EBITDA
410
117
23
550
450
137
18
605
492
161
12
666
20%
6
0
176
188
201
176
188
201
2,530
-240 <-- =-B36+B27
2,290
20%
6
0
176
188
201
176
188
201
growth
6
7
8
9
10
11
12
13
14
8,000
4,350
4,738
5,126
5,515
5,903
6,000
4,000
2,000
0
6
2,796
6
7
8
9
10
11
12
13
14
WACC
10%
3,890
4,440
4,990
5,540
6,090
6,640
7,190
7,740
8,290
12%
3,632
4,144
4,656
5,167
5,679
6,191
6,703
7,214
7,726
14%
3,396
3,873
4,350
4,826
5,303
5,780
6,257
6,733
7,210
RT IN ROW 53
1,464
(732)
(32)
26
(189)
538
(215)
323
(129)
194
1,611
(805)
(32)
33
(220)
587
(235)
352
(141)
211
371
220
459
242
2,031
(904)
1,127
1,718
2,364
(1,124)
1,240
1,941
117
320
450
830
1,718
129
320
450
1,042
1,941
323
189
(20)
11
(291)
19
(16)
214
352
220
(22)
12
(333)
19
(20)
228
538
189
6
732
587
220
(1)
805
5
214
214
228
4,832 <-- =G57*B62
5,060
5
214
214
228
4,832 <-- =B83*G57
5,060
16%
3,179
3,624
4,069
4,513
4,958
5,403
5,848
6,292
6,737
18%
2,980
3,395
3,811
4,226
4,641
5,057
5,472
5,887
6,303
10
11
20%
2,796
3,185
3,573
3,961
4,350
4,738
5,126
5,515
5,903
12
13
22%
2,627
2,991
3,354
3,718
4,081
4,445
4,808
5,172
5,535
14
24%
2,471
2,811
3,152
3,493
3,833
4,174
4,515
4,855
5,196
26%
2,326
2,646
2,965
3,285
3,604
3,924
4,243
4,563
4,882
EXERCISE 9
PROJECT FINANCE
Sales growth
Current assets/Sales
Current liabilities/Sales
Costs of goods sold/Sales
Depreciation rate
Interest rate on debt
Interest paid on cash & marketable securities
Tax rate
Dividend payout ratio
15%
15%
8%
55%
10%
10.00%
8.00%
40%
0% <-- No dividends until all the debt is paid off
Debt repayment table (essentially a loan table from Chapter 1): The principal amounts are
entered into the balance sheet and the interest is put into the profit and loss statement.
Principal
Debt
Of which:
at begin. payment
Year
of year
at end yr. Interest
1
200
52.76
20.00
2
167.24
52.76
16.72
3
131.21
52.76
13.12
4
91.57
52.76
9.16
5
47.96
52.76
4.80
Year
Income statement
Sales
Costs of goods sold
Interest payments on debt
Interest earned on cash & marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
1,150
(633)
(20)
(26)
(211)
261
(104)
156
156
1,323
(727)
(17)
(47)
(233)
298
(119)
179
179
1,521
(836)
(13)
(35)
(257)
379
(152)
227
227
Balance sheet
Cash and marketable securities the plug:
=C39-C28-C32
Current assets
Fixed assets
At cost
Depreciation
=B31-$B$7*(C30+B30)/2
Net fixed assets
Total assets
200
(657)
173
(526)
198
(352)
228
2,000
2,000
2,200
2,211
(211)
2,000
1,516
2,443
(443)
2,000
1,672
2,700
(700)
2,000
1,876
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
100
200
1,100
1,400
92
167
1,100
156
1,516
106
131
1,100
335
1,672
122
92
1,100
563
1,876
1
156
211
28
(8)
(211)
20
26
222
2
179
233
(26)
14
(233)
17
47
231
3
227
257
(30)
16
(257)
13
35
262
0
1
2
-1,100
15.90% <-- =IRR(B70:G70)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
3
-
ROE
ROE as a Function
20%
15%
10%
5%
0%
0
Repaid
principal
32.76
36.04
39.64
43.60
47.96
4
1,749
(962)
(9)
(19)
(284)
474
(190)
285
285
(127)
262
2,985
(985)
2,000
2,135
140
48
1,100
848
2,135
5
2,011
(1,106)
(5) <-- {=-TRANSPOSE(E17:E21)}
2
(314)
588
(235)
353
353
167
302
3,299
(1,299)
2,000
2,469
161
8 <-- =F47-$B$47/5
1,100
1,200
2,469
4
285
284
(34)
18
(284)
9
19
297
4
-
5
353
314
(39)
21
(314)
5
(2)
337
5
2,300 <-- =G34+G48+G49
Equity investment
500
1,000
1,500
2,000
Year
Income statement
Sales
Costs of goods sold
Interest payments on debt
Interest earned on cash & marketable securities
Depreciation
Profit before tax
Taxes
Profit after tax
Dividends
Retained earnings
15%
15%
8%
55%
10%
10.00%
8.00%
40%
0% <-- No dividends until all the debt is paid off
1,150
(633)
(100)
(1)
(211)
206
(82)
124
124
1,323
(727)
(84)
(3)
(233)
276
(110)
166
166
1,521
(836)
(66)
(4)
(257)
358
(143)
215
215
Balance sheet
Cash and marketable securities the plug:
=C39-C28-C32
Current assets
Fixed assets
At cost
Depreciation
=B31-$B$7*(C30+B30)/2
Net fixed assets
Total assets
200
(21)
173
(47)
198
(45)
228
2,000
2,000
2,200
2,211
(211)
2,000
2,152
2,443
(443)
2,000
2,151
2,700
(700)
2,000
2,184
Current liabilities
Debt
Stock
Accumulated retained earnings
Total liabilities and equity
100
1,000
1,100
2,200
92
836
1,100
124
2,152
106
656
1,100
289
2,151
122
458
1,100
504
2,184
1
124
211
28
(8)
(211)
100
2
166
233
(26)
14
(233)
84
3
215
257
(30)
16
(257)
66
3
240
4
270
0
1
2
-1,100
15.07% <-- =IRR(B59:G59)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
ROE
1
244
3
-
50%
40%
30%
20%
10%
0%
0
1,749
(962)
(46)
(2)
(284)
455
(182)
273
273
(5)
262
2,011
(1,106)
(24) <-- =IPMT($B$7,G13,5,1000)
3
(314)
570
(228)
342
342
78
302
2,985
(985)
2,000
2,257
3,299
(1,299)
2,000
2,380
140
240
1,100
777
2,257
161
1,100
1,119
2,380
4
273
284
(34)
18
(284)
46
5
342
314
(39)
21
(314)
24
<-- =F36-PPMT($B$7,G13,5,-1000,0)
2
305
4
-
(3)
345
5
2,219 <-- =G23+G37+G38
Equity investment
500
1,000
1,500
2,000