Week 2 Ch13 Toolkit

Week 2 Ch13 Toolkit -...

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Unformatted text preview: 4f4a3ca69b89eca9d0c142aa1d59de5738fe6ef4.xlsx Corporate Valuation Michael C. Ehrhardt Page 1 02/16/2012 4/11/2010 THE CORPORATE VALUATION MODEL (Section 13.2) INPUT DATA SECTION: Current and Projected Data Used in the Analysis Table 13-1. MagnaVision, Inc.: Income Statements for Years Ending December 31 (in mil ions of dol ars) Actual Projected 2010 2011 2012 2013 2014 Net Sales $700.0 $850.0 $1,000.0 $1,100.0 $1,155.0 Costs (except depreciation) $599.0 $734.0 $911.0 $935.0 $982.0 Depreciation 28.0 31.0 34.0 36.0 38.0 Total operating costs $627.0 $765.0 $945.0 $971.0 $1,020.0 Earning before int. & tax $73.0 $85.0 $55.0 $129.0 $135.0 Less: Net interest 13.0 15.0 16.0 17.0 19.0 Earning before taxes $60.0 $70.0 $39.0 $112.0 $116.0 Taxes (40%) 24.0 28.0 15.6 44.8 46.4 Net income before pref. div. $36.0 $42.0 $23.4 $67.2 $69.6 Preferred div. 6.0 7.0 7.4 8.0 8.3 Net income avail. for com. div. $30.0 $35.0 $16.0 $59.2 $61.3 Common dividends $0.0 $0.0 $0.0 $44.2 $45.3 Addition to retained earnings $30.0 $35.0 $16.0 $15.0 $16.0 Number of shares 100 100 100 100 100 Dividends per share $0.000 $0.000 $0.000 $0.442 $0.453 Table 13-2. MagnaVision Inc.: December 31 Balance Sheets (in mil ions of dol ars) Actual Projected 2010 2011 2012 2013 2014 Cash $17.0 $20.0 $22.0 $23.0 $24.0 Marketable Securities 63.0 70.0 80.0 84.0 88.0 Accounts receivable 85.0 100.0 110.0 116.0 121.0 Inventories 170.0 200.0 220.0 231.0 243.0 Total current assets $335.0 $390.0 $432.0 $454.0 $476.0 Net plant and equipment 279.0 310.0 341.0 358.0 376.0 Total Assets $614.0 $700.0 $773.0 $812.0 $852.0 Liabilities and Equity Accounts Payable $16.0 $20.0 $22.0 $23.0 $24.0 Notes payable 123.0 140.0 160.0 168.0 176.0 Accruals 44.0 50.0 55.0 58.0 61.0 Total current liabilities $183.0 $210.0 $237.0 $249.0 $261.0 Long-term bonds 124.0 140.0 160.0 168.0 176.0 Preferred stock 62.0 70.0 80.0 84.0 88.0 Common Stock (par plus paid in capital) $200.0 $200.0 $200.0 $200.0 $200.0 Retained earnings 45.0 80.0 96.0 111.0 127.0 Common equity $245.0 $280.0 $296.0 $311.0 $327.0 Total liabilities and equity $614.0 $700.0 $773.0 $812.0 $852.0 Figure 13-1. Calculating MagnaVision's Expected Free Cash Flow (Mil ions of Dol ars) Actual Projected Step 1: Calculate FCF 2010 2011 2012 2013 2014 1. Net operating working capital $212.00 $250.00 $275.00 $289.00 $303.00 2. Net plant and equipment 279.00 310.00 341.00 358.00 376.00 3. Net operating capital $491.00 $560.00 $616.00 $647.00 $679.00 4. Investment in operating capital 69.00 56.00 31.00 32.00 5. NOPAT $43.80 $51.00 $33.00 $77.40 $81.00 6. Less: Investment in op. capital 69.00 56.00 31.00 32.00 7. Free cash flow-$18.00-$23.00 $46.40 $49.00 Step 2: Calculate the value of operations Actual Projected 2010 2011 2012 2013 2014 Long-term growth rate 5% Weighted Avg. Cost of Cap. (WACC) 10.84% Free Cash Flow-$18.00-$23.00 $46.40 $49.00 Find the horizon value....
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