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    Internal Test 4 - Case

    Uploaded by

    Shivani Jadhav
    - The company has $50 million in sales growing at 25% annually with 20% EBITDA margins. It secures a JV in year 3 that scales up to $50 million in additional sales by year 6. - Capex is 7.5% of sales for normal growth and $4 million for the JV in year 3. The company uses debt and retained earnings to fund growth. - The document provides financial projections through year 6 and formulas to calculate working capital metrics. It asks to value the company using DCF and relative valuation based on year 6 PE of 15.

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    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd

    Internal Test 4 - Case

    Uploaded by

    Shivani Jadhav
    2K views6 pages
    - The company has $50 million in sales growing at 25% annually with 20% EBITDA margins. It secures a JV in year 3 that scales up to $50 million in additional sales by year 6. - Capex is 7.5% of sales for normal growth and $4 million for the JV in year 3. The company uses debt and retained earnings to fund growth. - The document provides financial projections through year 6 and formulas to calculate working capital metrics. It asks to value the company using DCF and relative valuation based on year 6 PE of 15.

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    Internal Test 4 - Case.xlsx

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    - The company has $50 million in sales growing at 25% annually with 20% EBITDA margins. It secures a JV in year 3 that scales up to $50 million in additional sales by year 6. - Capex is 7.5% of sales for normal growth and $4 million for the JV in year 3. The company uses debt and retained earnings to fund growth. - The document provides financial projections through year 6 and formulas to calculate working capital metrics. It asks to value the company using DCF and relative valuation based on year 6 PE of 15.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    2K views6 pages

    Internal Test 4 - Case

    Uploaded by

    Shivani Jadhav
    - The company has $50 million in sales growing at 25% annually with 20% EBITDA margins. It secures a JV in year 3 that scales up to $50 million in additional sales by year 6. - Capex is 7.5% of sales for normal growth and $4 million for the JV in year 3. The company uses debt and retained earnings to fund growth. - The document provides financial projections through year 6 and formulas to calculate working capital metrics. It asks to value the company using DCF and relative valuation based on year 6 PE of 15.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 6

    Build A Financial Model

    An company has sales of $50 million growing at 25% YoY with EBITDA margins at 20%. It secures a JV in Year 3
    6 (linear scaling implies Revenue Yr-3=20, Yr-4=30). Capex required for normal growth of the firm is 7.5% of sal
    7.5% of JV sales). The model should use debt, retained earnings to grow the firm. The current debt ratio of the
    60 days. New Capex should be done at current debt equity ratio. For current year inventory = 6mn, receivables
    Tax rate for the company is 30%, Depreciation rate is 10%, Interest Expense Rate is 10% (depreciation and inter
    income on beginning of period cash). Value the firm using both methods DCF and Relative. For DCF Valuation a
    market risk premium is 7% and Beta of comparable company is 0.5. Company goes in maturity stage from year
    the value of the firm in year 6 at PE of 15 ? What is the value of the firm today at 1 year forward PE 10 ?

    Formulae for Working Capital Line Items:


    DOH Average Inventory / (COGS/365)
    DSO Average Accounts Receivables / (Sales/365)
    Pay Days Average Trade Payables / (COGS/365)
    %. It secures a JV in Year 3 with additional business of $20 million at EBITDA of 12.5% which linearly scales up to $50 millio
    of the firm is 7.5% of sales and Capex required for expansion at time of JV is $4 million (after JV year capex for JV revenue
    e current debt ratio of the firm is 2:1 with average cash conversion cycle of 90 days and payment terms with debtor and cr
    ntory = 6mn, receivables = 8 mn, payables = 5 mn and retained earning = 9mn, Fixed Asset, Net & Gross = 15mn and Cash
    % (depreciation and interest to be calculated on average of current and previous year) and Interest Income Rate is 5%(inte
    ative. For DCF Valuation assume weights of equity and debt based on current book value. Risk free return in the economy
    maturity stage from year 7 onwards with growth at 5% forever. For relative valuation use P/E as valuation metric. What w
    ar forward PE 10 ?
    Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6

    Income Statement

    Sales 50 63 78 98 122 153 190.73


    y/y % growth 25% 25% 25% 25% 25% 0.25
    Sales - JV 0 0 20 30 40 50.00
    Total Sales 50 63 78 118 152 193 240.73

    COGS 50 63 96 124 157 196.34

    EBITDA 20% 13 16 20 24 31 38.15


    EBITDA-JV 12.50% - - 3 4 5 6.25
    EBITDA-Total 13 16 22 28 36 44.40
    Depreciation 10.0% 2 2 3 4 6 7.17
    EBIT 11 13 19 24 30 37.22
    Interest Expense 10.0% 1.956 2.308 2.881 3.638 4.500 5.58
    Interest Income 5.0% 0.150 (0.066) 0.513 (0.042) 0.991 0.71
    EBT 8.959 10.989 16.542 20.227 26.459 32.35

    Tax 30.0% 2.69 3.30 4.96 6.07 7.94 9.71


    PAT 6.27 7.69 11.58 14.16 18.52 22.65

    Capex Schedule
    Capex 5 6 7 9 11 14
    Capex as % Sales 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
    Capex - JV 4 2 3 4
    Capex as % Sales JV 7.5% 7.5% 7.5%
    Total Capex 5 6 11 11 14 18

    Capex Funding
    Debt 3 4 8 8 10 12
    Equity - Retained Earning

    Balance Sheet

    Cash 3 (1) 10 (1) 20 14 41


    Inventory 6 19 12 35 26 51 45
    Account Receivable 8 13 13 26 24 39 40
    PPE, Gross 15 20 26 37 48 63 81
    Acc Dep 2 4 7 11 17 24
    PPE, Net 15 18 22 30 37 46 57
    Total Assets 32 48 57 89 107 150 183

    Accounts Payable 5 11 9 22 18 33 31
    Debt 18 21 25 33 40 50 62
    Retained Earnings 9 15 23 35 49 67 90
    Total Liabilities and Sh Equity 32 48 57 89 107 150 183
    Checksum - - - - - - -

    D/E
    DOH 90 90 90 90 90 90 90
    DSO 60 60 60 60 60 60 60
    Pay Days 60 60 60 60 60 60 60

    Cash Flow Statement

    PAT 6 8 12 14 19 23
    Dep 2 2 3 4 6 7
    Change in Inv (13) 6 (23) 9 (25) 6
    Change in AR (5) (1) (12) 1 (14) (1)
    Change in AP 6 (2) 13 (4) 15 (2)
    CFO 0 -3 14 -7 24 -1 32

    Capex (5) (6) (11) (11) (14) (18)


    CFI 0 -5 -6 -11 -11 -14 -18

    Change in Debt 3 4 8 8 10 12
    CFF 0 3 4 8 8 10 12

    Net Change in Cash 0 -4 12 -11 21 -6 26

    BOP Cash 3 (1) 10 (1) 20 14


    EOP Cash 3 (1) 10 (1) 20 14 40.60

    DCF Valuation

    We
    Wd
    Ke
    Kd
    WACC

    NOPAT = EBIT*(1-T)
    Depreication
    Capex
    Change in Working Capital
    FCFF
    TerminalValue
    Total Cash Flows
    Enterprise Value
    Less: Debt
    Add: Cash
    Intrinsic Equity Value

    Relative Valuation

    PAT - Year1 PAT - Year6


    PE PE
    Value Value

    CAGR %
    <==fcff(6)*(1+5%)/(wacc-5%)

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