Model 01-01
Basic Arbitrage Model
Month 0
Month 1
Bidder (B)
$30
$30
Target (T)
$44
$45
$45
$45
T
-$44
$1
-$45
$0
Investment
1-Month Gain
Annualized Gain
$44.50
2.247%
26.966%
Arbitrage Firm
Short
Long
1.5 B
1
Net
Model 13-01A
Leveraged Recaps Retire Equity Shares
A. Initial Input Values
1. Operating Income (millions)
2. Shares Outstanding (millions) (N0)
3. Management Ownership
4. Market Value per Share (P0)
5. Market Value of the Firm (millions) (V0)
6. Tax Rate
Model 10-08
Valuations with Value Driver Patterns for Industry Stages
Ia
Strategic Vision
8 Value*
9 Value/NOI0(1-T)
10 Value/R0
Innovation
III
High
Growth
Internet
1 R0
2 gs
3m
4T
5n
6k
7 Is
Ib
Biotech
New
Telecom
$1,000
40%
25%
35%
15
15%
15%
$21,980
13
Model 16-02
Capital Cash Flow Model
(Expected Asset Return Using CAPM)
Year 0
1. Net revenues
2. Revenue growth
3. NOI = EBIT
4. Cash tax rate
5. Income
6. NOPAT
rate
(T)
taxes
+ Depreciation
Change in working capital
Capital expenditures
Change in oth
Model 16-01A
LBO Model Loan Amortization, 5 Year Period
Bank Loan Amortization
Loan
Interest Rate
Payments
Interest
Principal
Balance
$1,800,000
9%
$462,766
Year 1
162,000
300,766
1,499,234
Year 2
134,931
327,835
1,171,398
Year 3
105,426
357,341
814,058
Y
Model 13-02
Leveraged Recaps Payment of Large Cash Dividend
A. Basic Data Inputs
Market Value of Equity per Share
Net Operating Income (NOI), millions
Shares Outstanding, millions
Shares Owned By Management, millions
$24
$30
10
1
Each Nonmanagement Shareh
Model 16-03
Capital Cash Flow Model
(Expected Asset Return Using CAPM and Weighted Average)
Year 0
1. Net revenues
2. Revenue growth
3. NOI
rate
$500
40.0%
200
$300
250
50
100
50
$350
Year 3
Year 4
Year 5 = n
Year n+1
$6,802
8.0%
$7,347
8.0%
$7,567
3.0%
e
Model 16-04
LBO Valuation
Year 0
1. Net revenues
2. Revenue growth
3. NOI
$10,000
rate
= EBIT
Year 1
$10,670
6.7%
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Panel A Inputs for Present Value Calculations
$11,385
$12,148
$12,949
$13,804
$14,701
6.7%
6.7%
6.6
Model 18-02A
Accounting for a Stock Buyback Use Excess Cash
Panel A: Inputs
Excess Cash
Net Income
Earnings Rate on Excess Cash
Shares Outstanding
P/E Ratio
Pre-Buyback
Post-Buyback
Tax Rate
Shares for Buyback
Share Price Buyback
Buyback
$2,000 million
$1
Model 18-03A
GM - Share Repurchase Model Basic
1999
Revenue
Net Income
Cash Used for Share Buyback
GM Shares Outstanding (year-beg)
GM Shares Repurchased
GM Shares Retired with Hughes Stock
GM Shares Outstanding (year-end)
Average Shares Outstanding
EPS1
Model 10-05A
General 4-Stage Model
(Revenue Growth Model)
Revenue Period 0 (R0)
$1,000
Stage1
Number of Periods (n)
Growth Rate of Revenues (g)
Operating Margin (m)
Tax Rate (T)
Cost of Capital (k)
Investment Requirements Rate (I)
h = (1+g)/(1+k)
Stage2
S
Model 06-01
Playing the Differential P/E Game
Company B (Bidder) is acquiring Company T (Target).
The following data are available.
Bidder
B
1. Net income after taxes (000s)
2. Common shares outstanding (000s)
3. Price/Earnings (P/E) Ratio (premerger)
Tar
Model 03-01A
Initial Financial Data for Merger Accounting
Acquiring
Firm
Initial Balance Sheets
Current Assets
Land
Plant and Equipment
Less: Accumulated Depr.
Net Plant & Equipment
Goodwill
Total Assets
$210,000
50,000
$110,000
20,000
200,000
60,000
100,
Model 09-01
Comparable Companies or Transactions Valuation Method
Example A
Panel A: Company W Is Compared with Companies TA, TB, and TC
Ratio
Enterprise market value/revenues
Enterprise market value/EBITDA
Enterprise market value/free cash flows
Company
Model 10-02
Tests of Merger Performance
Premerger
Ownership
Proportions
74.9%
25.1%
100.0%
Market Caps
$175.0
$58.7
$233.7
Bidder
Target
Total
Postmerger
Combined Value
Paid to Target
Remainder
Bidder Premerger
Gain from Merger
Portion to Bidder
$283.3
$7
Model 10-01
Bidder / Target Deal Terms
Pre-Merger
Share Price
Shares Outstanding (million)
Total Market Value (billion)
Dollar Amounts
Bidder
Target
$72.00
$75.25
2,431
780
$175.0
$58.7
Exchange Terms
1.32 for
Post-Merger
Number of Shares (million)
2431
P
Model 09-03
Valuation Model Based on r and b Definition
Value Drivers
Valuation:
Xo =
$17,000
T=
bs =
38.0%
30.835%
bc =
0.949%
rs =
13.0%
rc =
316.1%
gs =
4.0%
gc =
3.0%
n=
10
k=
9.18%
t
1 g s
X o (1 T )(1 bs )
t 1 k
1
n
1st Term =
$56,344
34.5%
n
Model 09-02
Basic Revenue Growth Formula
(Dollar Amounts in Millions Except per Share)
Panel A Value Drivers
R0 = Base year revenues
$100,000
Initial growth period
ms = Net operating income margin
Ts = Tax rate
gs = Growth rate
ds = Depreciation
Iws = Wor
Model 10-03A
General 5-Year DCF Spreadsheet Valuation Model (Dollar Amounts in Millions Except per Share)
Year 0
Year 2
Year 3
Year 4
Year 5
Year n+1
Panel A Inputs for Present Value Calculations
$100,000 $104,000 $108,160 $112,486 $116,986 $121,665 $125,
Model 10-04
Merger Valuation Application
(Based on Revenue Growth Model 09-02)
Bidder
Target
Combined
$18,500
$6,000
$24,500
Super growth period
ms = Net operating income margin
Ts = Tax rate
gs = Growth rate
ds = Depreciation
Iws = Working capital requir
Model 18-01A
Intrinsic Value Effect of Repurchases vs. Investment
(No Share Price Premium)
Part A Basic Relationships
1. Cash flow per year
2. Cost of capital
3. Intrinsic value before repurchase = (1)/(2)
4. Number of shares
5. Intrinsic value per share