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    DCF Model

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    Katherine Chou
    This document summarizes the historical financial performance and forecasted discounted cash flow model of a company. It shows sales, costs, EBITDA, taxes, capital expenditures, net working capital, and unlevered free cash flow from 2006 to 2011. It then forecasts these items from 2010 to 2014 to calculate the company's enterprise value of $5.54 billion and implied share price of $0.57 based on an assumed perpetual growth rate, WACC, and terminal value. A sensitivity analysis is also presented.

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    DCF Model

    Uploaded by

    Katherine Chou
    574 views6 pages
    This document summarizes the historical financial performance and forecasted discounted cash flow model of a company. It shows sales, costs, EBITDA, taxes, capital expenditures, net working capital, and unlevered free cash flow from 2006 to 2011. It then forecasts these items from 2010 to 2014 to calculate the company's enterprise value of $5.54 billion and implied share price of $0.57 based on an assumed perpetual growth rate, WACC, and terminal value. A sensitivity analysis is also presented.

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    dcf-model

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    This document summarizes the historical financial performance and forecasted discounted cash flow model of a company. It shows sales, costs, EBITDA, taxes, capital expenditures, net working capital, and unlevered free cash flow from 2006 to 2011. It then forecasts these items from 2010 to 2014 to calculate the company's enterprise value of $5.54 billion and implied share price of $0.57 based on an assumed perpetual growth rate, WACC, and terminal value. A sensitivity analysis is also presented.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    574 views6 pages

    DCF Model

    Uploaded by

    Katherine Chou
    This document summarizes the historical financial performance and forecasted discounted cash flow model of a company. It shows sales, costs, EBITDA, taxes, capital expenditures, net working capital, and unlevered free cash flow from 2006 to 2011. It then forecasts these items from 2010 to 2014 to calculate the company's enterprise value of $5.54 billion and implied share price of $0.57 based on an assumed perpetual growth rate, WACC, and terminal value. A sensitivity analysis is also presented.

    Copyright:

    Attribution Non-Commercial (BY-NC)
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
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    At a glance
    Powered by AI
    The document discusses a discounted cash flow (DCF) model valuation of a company. It provides financial projections, calculations of weighted average cost of capital (WACC), terminal value, and sensitivity analysis.

    The DCF model is analyzing a company's projected financials from 2006-2014 to determine an implied enterprise value based on future free cash flows.

    The main inputs used are sales growth rates, EBITDA margins, capital expenditures, tax rates, and assumptions for perpetual growth rate and WACC. Key assumptions include a perpetual growth rate of 3% and WACC of 11.4%.

    DCF model - www.business-valuation.

    net
    (in million) Actual CAGR Forecast period
    2006 2007 2008 2009 (06 - 09) 2010 2011
    Sales 2,955 3,568 4,102 4,663 16% 5,036 5,438
    % growth 20.7% 15.0% 13.7% 8.0% 8.0%

    Total costs -2,511 -3,047 -3,524 -4,031 17% -4,316 -4,661


    % sales 85.0% 85.4% 85.9% 86.5% 85.7% 85.7%

    EBITDA 444 521 578 631 12% 720 778


    % margin 15.0% 14.6% 14.1% 13.5% 14.3% 14.3%

    Depreciation & Amortization: -49 -63 -75 -84 -91 -98


    % sales 1.6% 1.8% 1.8% 1.8% 1.8% 1.8%
    EBIT 396 459 503 548 11% 629 680

    Taxes (30%) -119 -138 -151 -164 -189 -204

    Capex -79 -41 -169 -116 -125


    % sales 2.2% 1.0% 3.6% 2.3% 2.3%

    Increase/Decrease in NWC -145 -77 -18 2 -31

    Unlevered Free Cash Flow 159 309 281 417 417

    WACC 11.4%
    Discount Period 0.5 1.5
    Discount Factor 0.95 0.85
    Present value of free cash flow 395 355

    Terminal Value
    Terminal Year Free Cash Flow 526
    Perpetuity Growth Rate 3.0%
    Terminal Year EBITDA 980
    Terminal Value 6,483
    Implied Exit Multiple 7.0x
    Discount Period 5.0
    Discount Factor 0.6
    Present Value of Terminal Value 3,787
    % of Enterprise Value 68%

    (in million) Actual Forecast period


    Net Working Capital 2006 2007 2008 2009 2010 2011
    Account receivables 10 14 17 13
    Inventory 543 749 827 953
    Prepaid expenses and other 110 42 63 94
    Total Current Assets 663 804 906 1,060 1,128 1,218
    % sales 22.4% 22.5% 22.1% 22.7% 22.4% 22.4%

    Account payable
    Accrued Liabilities
    Other Current Liabilities
    Total Current Liabilities -509 -505 -530 -666 -735 -794
    % sales 17.2% 14.1% 12.9% 14.3% 14.6% 14.6%

    Net Working Capital 155 300 377 394 393 424


    % sales 5% 8% 9% 8% 8% 8%
    DCF model - www.business-valuation.net
    Forecast period
    2012 2013 2014 Input
    5,874 6,343 6,851 Wacc Calculation
    8.0% 8.0% 8.0% Target Capital Structure (1)
    Debt to Total Capitalization 29.1%
    -5,034 -5,436 -5,871 Equity to Total Capitalization 70.9%
    85.7% 85.7% 85.7% Debt to Equity Ratio 41.8%

    840 907 980 Cost of Equity


    14.3% 14.3% 14.3% Risk-free rate (2) 4.0%
    Market risk Premium (3) 7.1%
    -106 -114 -123 Levered Beta (4) 1.22
    1.8% 1.8% 1.8% Size Premium (5) 1.7%
    734 793 856 Cost of Equity 14.3%

    -220 -238 -257 Cost of Debt


    Cost of Debt 6.0%
    -135 -146 -158 Taxes 30.0%
    2.3% 2.3% 2.3% After Tax Cost of Debt 4.2%

    -34 -37 -40 WACC 11.4%

    451 487 526 (1) Obtained from Beta and Capital Structure tab
    (2) Interpolated Yield on 10-year Treasury bond
    (3) Obtained from Ibbotson SBBI Valuation Yearbook
    2.5 3.5 4.5 (4) Obtained from Beta and Capital Structure tab
    (5) Low-Cap Decile size premium based on market
    0.76 0.69 0.62 capitalization, per Ibbotson
    344 334 324

    Forecast period
    2012 2013 2014

    1,316 1,421 1,535


    22.4% 22.4% 22.4%

    -858 -926 -1,000


    14.6% 14.6% 14.6%

    458 495 534


    8% 8% 8%
    el - www.business-valuation.net DCF model - www.business-valuation.net
    Sensitivity Analysis
    Output Perpetuity growth %
    Enterprise value ### 5,540 2.0% 2.5% 3.0% 3.5%
    Present value of Free Cash Flow 1,753 9.4%
    10.4%

    WACC
    Terminal Value 6,483 11.4%
    Discount Factor 0.58 12.4%
    Present Value of Terminal Value 3,787 13.4%
    % of Enterprise Value 68%
    Annual sales growth %
    Enterprise value 5,540 ### 5,540 7.0% 7.5% 8.0% 8.5%
    Less: Total debt 100 12.3%

    EBITDA %
    Plus: Cash and Cash Equi. 300 13.3%
    Net Debt -200 14.3%
    15.3%
    Implied Equity Value 5,740 16.3%
    Outstanding shares 10,000
    Implied share price 0.57

    Implied multiples
    Enterprise Value 5,540
    SALES 2010 5,036
    EBITDA 2010 720
    Implied EV/SALES 1.1x
    Implied EV/EBITDA 7.7x
    valuation.net
    is
    growth %
    4.0%

    growth %
    9.0%
    Comparable Companies Unlevered Beta

    Levered Beta Market Value of Market Value of Equity/ Total Marginal


    Company (1) Debt (2) Equity (3) Debt/ Equity Assets Tax Rate
    Company AA 1.23 500 1125 44.4% 69.2% 30%
    Company BB 1.31 400 868 46.1% 68.5% 30%
    Company CC 1.15 450 788 57.1% 63.6% 30%
    Company DD 1.12 375 1125 33.3% 75.0% 30%
    Company EE 1.25 250 900 27.8% 78.3% 30%

    Median 1.23 44.4% 69.2%


    Mean 1.21 41.8% 70.9%

    (1) From Bloomberg


    (2) Book Value of Debt
    (3) From Bloomberg
    (4) Unlevered Beta = Predicted Levered Beta / (1 + Debt/Equity) x (1-t))

    Relevered Mean Unlevered Mean Target Target Relevered


    Beta Beta Debt/ Equity Marginal Beta
    Tax Rate
    Target Company 0.94 41.8% 30% 1.22
    Unlevered
    Beta (4)
    0.94
    0.99
    0.82
    0.91
    1.05

    0.94
    0.94

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