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    Ib Case Mercury

    Uploaded by

    Govind Saboo
    1) The company generated free cash flows of $14,723, $26,762.60, and $22,469 for the years 2007, 2008, and 2009 respectively based on revenue, expenses, taxes, depreciation, changes in net working capital and capital expenditures. 2) The weighted average cost of capital is calculated to be 11.06% based on industry averages. 3) Discounting the free cash flows at 11.06% gives a present value of $85,951 for the free cash flows through 2009 with a terminal value of $240,293, giving an overall value of $326,244 for the firm.

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    Ib Case Mercury

    Uploaded by

    Govind Saboo
    1K views9 pages
    1) The company generated free cash flows of $14,723, $26,762.60, and $22,469 for the years 2007, 2008, and 2009 respectively based on revenue, expenses, taxes, depreciation, changes in net working capital and capital expenditures. 2) The weighted average cost of capital is calculated to be 11.06% based on industry averages. 3) Discounting the free cash flows at 11.06% gives a present value of $85,951 for the free cash flows through 2009 with a terminal value of $240,293, giving an overall value of $326,244 for the firm.

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    1) The company generated free cash flows of $14,723, $26,762.60, and $22,469 for the years 2007, 2008, and 2009 respectively based on revenue, expenses, taxes, depreciation, changes in net working capital and capital expenditures. 2) The weighted average cost of capital is calculated to be 11.06% based on industry averages. 3) Discounting the free cash flows at 11.06% gives a present value of $85,951 for the free cash flows through 2009 with a terminal value of $240,293, giving an overall value of $326,244 for the firm.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    1K views9 pages

    Ib Case Mercury

    Uploaded by

    Govind Saboo
    1) The company generated free cash flows of $14,723, $26,762.60, and $22,469 for the years 2007, 2008, and 2009 respectively based on revenue, expenses, taxes, depreciation, changes in net working capital and capital expenditures. 2) The weighted average cost of capital is calculated to be 11.06% based on industry averages. 3) Discounting the free cash flows at 11.06% gives a present value of $85,951 for the free cash flows through 2009 with a terminal value of $240,293, giving an overall value of $326,244 for the firm.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
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    Free Cash Flow for the Firm

    Exhibit 6
    Particulars / Year

    2007

    Consolidated Revenue
    Less: Operating Expenses (Including Depreciation)
    Less: Corporate Overhead
    9
    Less: Tax (@ 40%)
    Net Profit (PAT)
    Add: Estimated Depreciation
    Less: Increase / Decrease in Estimated NWC
    Less: Estimated Capital Expenditure
    Free Cash Flow For The Firm (FCFF)

    479329
    423837
    8487
    47005
    18802
    28203
    9587
    11084
    11983
    14723

    2008

    2009

    489028 532137
    427333 465110
    8659
    9422
    53036
    57605
    21214.4 23042
    31821.6 34563
    9781
    10643
    2614
    9434
    12226
    13303
    26762.6 22469

    Industry Performance & Averages


    Exhibit 3
    Comparable Companies /
    Particulars:

    Equity Market Value

    Net Debt

    D/E

    Equity
    Beta

    D&B Shoe Company


    Marina Wilderness
    General Shoe Corp.
    Kinsley Coulter Products
    Victory Athletic
    Surfside Footwear
    Alpine Company
    Heartland Outdoor Footware
    Templeton Athletic
    Average

    420098
    1205795
    533463
    165560
    35303250
    570684
    1056033
    1454875
    397709
    4567496

    125442
    -91559
    171835
    82236
    7653207
    195540
    300550
    -97018
    169579
    945535

    29.9%
    -7.6%
    32.2%
    49.7%
    21.7%
    34.3%
    28.5%
    -6.7%
    42.6%
    24.9%

    2.68
    1.94
    1.92
    1.12
    0.97
    2.13
    1.27
    1.01
    0.98
    1.56

    Equity Beta
    CAPM Ke
    WACC

    1.60
    13%
    11.06%

    2008

    2009

    Present Value of FCFF


    Particulars / Year

    2007

    Free Cash Flow For The Firm (FCFF)


    WACC
    Present Value of FCFF
    Year

    Present Value

    2007
    2008

    13257.31
    21699.32

    2009

    16404.41

    2010

    16961.55

    2011

    17628.78

    Net Value

    85951.37

    Present value of FCFF


    Terminal cash flow
    Value of the enterprise

    85951.37
    240293.3498
    326244.72

    14723
    11.06%

    26762.6
    11.06%

    22469
    11.06%

    Net Working Capital


    Exhibit 4&7
    2006
    2007

    2010

    2011

    Particulars / Year

    570319
    498535
    10098
    61686
    24674.4
    37011.6
    11406
    8359
    14258
    25800.6

    597717
    522522
    10583
    64612
    25844.8
    38767.2
    11954
    5998
    14943
    29780.2

    Current Assets
    cash & cash equivalent
    Accounts Receivable
    Inventory
    Prepaid Expenses
    Total Current Assets

    10676
    45910
    73149
    10172
    129231

    4161
    47888
    83770
    14474
    146132

    Current Liabilities
    Accounts Payable
    Accrued Expenses

    16981
    18810

    18830
    22778

    Total Current Liabilities

    35791

    41608

    Net Working Capital


    Increase / Decrease

    93440
    0

    104524
    11084

    1.28
    0
    5%
    4.93%

    20 years

    rages
    Equity /
    Value

    Debt /
    Value

    Asse
    t
    Beta

    77.0%
    108.2%
    75.6%
    66.8%
    82.2%
    74.5%
    77.8%
    107.1%
    70.1%
    82.2%

    23.0%
    -8.2%
    24.4%
    33.2%
    17.8%
    25.5%
    22.2%
    -7.1%
    29.9%
    17.8%

    2.06
    2.10
    1.45
    0.75
    0.80
    1.59
    0.99
    1.08
    0.69
    1.28

    2010

    2011

    Assumptions

    Asset Beta
    Debt Beta
    Risk Premium
    Risk Free Rate
    Given
    Tax Rate
    Cost of Debt
    Debt to Value Ratio

    40%
    6%
    20%

    25800.6 29780.2
    11.06% 11.06%
    Projected Balance Sheet
    Particulars

    2007

    2008

    Total Assets

    283374

    288810

    Total Current & NonCurrent Liabilities

    62342

    62685

    Owner's Equity
    (Balancing Figure)

    221032

    226125

    ROC

    12.76%

    14.07%

    Reinvestment
    NOPAT
    Reinvestment rate
    Reinvestment capital
    ROC
    Exp Growth rate

    8987
    38767.2
    0.23182
    259352
    0.14948
    0.03465

    Net Working Capital


    2008

    2009

    2010

    2011

    4195
    48857
    85465
    14767
    149089

    4566
    53164
    92999
    16069
    162232

    4894
    5130
    56978 59715
    99672 104460
    17222 18049
    173872 182224

    18985
    22966

    20664
    24996

    22149
    26792

    23214
    28081

    41951

    45660

    48941

    51295

    107138
    2614

    116572
    9434

    124931 130929
    8359
    5998

    ected Balance Sheet


    2009

    2010

    2011

    304984

    319804

    331381

    66394

    69675

    72029

    238590

    250129

    259352

    14.49%

    14.80%

    14.95%

    Free Cash Flow for the Firm


    exhibit 6
    Particulars / Year
    Consolidated Revenue
    Less: Operating Expenses (Including Depreciation)
    Less: Corporate Overhead
    Consolidated Operating Income (EBIT / EBT)
    Less: Tax (@ 40%)
    Net Profit (PAT)
    Add: Estimated Depreciation
    Less: Increase / Decrease in Estimated NWC
    Less: Estimated Capital Expenditure
    Free Cash Flow For The Firm (FCFF)

    2007

    2008

    2009

    2010

    479329
    423837
    8487
    47005
    18802
    28203
    9587
    4569
    11983
    21238

    489028
    427333
    8659
    53036
    21214.4
    31821.6
    9781
    2648
    12226
    26728.6

    532137
    465110
    9422
    57605
    23042
    34563
    10643
    9805
    13303
    22098

    570319
    498535
    10098
    61686
    24674.4
    37011.6
    11406
    8687
    14258
    25472.6

    Industry Performance & Averages


    Exhibit 3
    Comparable Companies /
    Equity Market Value Net Debt
    Particulars:
    D&B Shoe Company
    Marina Wilderness
    General Shoe Corp.
    Kinsley Coulter Products
    Victory Athletic
    Surfside Footwear
    Alpine Company
    Heartland Outdoor Footware
    Templeton Athletic
    Average

    420098
    1205795
    533463
    165560
    35303250
    570684
    1056033
    1454875
    397709
    4567496

    125442
    -91559
    171835
    82236
    7653207
    195540
    300550
    -97018
    169579
    945535

    D/E

    29.9%
    -7.6%
    32.2%
    49.7%
    21.7%
    34.3%
    28.5%
    -6.7%
    42.6%
    24.9%

    Equity Equity /
    Beta
    Value
    2.68
    1.94
    1.92
    1.12
    0.97
    2.13
    1.27
    1.01
    0.98
    1.56

    77.0%
    108.2%
    75.6%
    66.8%
    82.2%
    74.5%
    77.8%
    107.1%
    70.1%
    82.2%

    2011

    Particulars / Year

    597717
    522522
    10583
    64612
    25844.8
    38767.2
    11954
    6234
    14943
    29544.2

    Current Assets
    cash & cash equivalent
    Accounts Receivable
    Inventory
    Prepaid Expenses
    Total Current Assets
    Current Liabilities
    Accounts Payable
    Accrued Expenses

    Asset
    Beta

    23.0%
    -8.2%
    24.4%
    33.2%
    17.8%
    25.5%
    22.2%
    -7.1%
    29.9%
    17.8%

    2.06
    2.10
    1.45
    0.75
    0.80
    1.59
    0.99
    1.08
    0.69
    1.28

    2009

    10676
    4161
    4195
    4566
    45910
    47888
    48857
    53164
    73149
    83770
    85465
    92999
    10172
    14474
    14767
    16069
    139907 150293 153284 166798

    16981
    18810

    18830
    22778

    18985
    22966

    20664
    24996

    Total Current Liabilities 35791

    41608

    41951

    45660

    Net Working Capital


    Increase / Decrease

    Debt /
    Value

    Net Working Capital


    Exhibit 4
    2006
    2007
    2008

    104116 108685 111333 121138


    0
    4569
    2648
    9805

    Assumptions

    Asset Beta
    Debt Beta
    Risk Premium
    Risk Free Rate

    1.28
    0
    5%
    4.93%

    Given
    Tax Rate
    Cost of Debt
    Debt to Value Ratio

    40%
    6%
    20%

    20 years

    2010

    2011

    4894
    5130
    56978
    59715
    99672 104460
    17222
    18049
    178766 187354

    22149
    26792

    23214
    28081

    48941

    51295

    129825 136059
    8687
    6234

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