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With this model you have the ability to adjust a variety of inputs and view how those adjustments affect the financial statements
and the company's valuation. A very common question in finance interviews is "What happens to the three financial statements
if X changes?" This model will allow you to see how different adjustments flow through the three financial statements.
We feel as though this model will be a useful tool that allows you to explore how changes in financial assumptions flow through
the financial statements. It also serves as a basic introduction to the primary company valuation techniques.
Historical Projected
2009 2010 2011 2012 2013 2014 Assumptions
Operating Expenses
Selling, General and Administrative 8.0 8.4 8.8 9.3 9.7 10.2 SG&A as a % of Revenue 8%
Depreciation & Amortization 10.0 10.0 10.0 10.0 10.0 10.0
Other Operating Expenses 9.0 9.5 9.9 10.4 10.9 11.5 Other Oper. Exp. As a & of Revenue 9%
Total Operating Expenses 27.0 27.9 28.7 29.7 30.7 31.7
Earnings Before Interest and Taxes 43.0 45.7 48.4 51.4 54.4 57.6
Interest Expense 4.5 4.5 4.5 4.5 4.5 4.5 Cost of Long-Term Debt 9%
Income Tax Expense 15.4 16.5 17.6 18.7 20.0 21.3 Income Tax Rate 40%
Historical Projected
2009 2010 2011 2012 2013 2014 Assumptions
Assets
Current Assets
Cash and Equivalents $ 100.0 $ 119.6 $ 145.7 $ 173.5 $ 203.2 $ 234.8
Inventory 10.0 11.7 12.3 12.9 13.5 14.2 Inventory Turnover Ratio 9.0x
Accounts Receivable 6.0 5.8 6.0 6.3 6.7 7.0 Days Sales Outstanding 20 Days
Other Current Assets 4.0 4.2 4.4 4.6 4.9 5.1 Other Current Assets as a % of Revenue 4%
Total Current Assets 120.0 141.2 168.4 197.3 228.2 261.0
Net PP&E 100.0 100.0 100.0 100.0 100.0 100.0
Liabilities
Accounts Payable 7.0 3.9 4.1 4.3 4.5 4.7 Days Payable Outstanding 45 Days
Other Current Liabilities 13.0 12.6 13.2 13.9 14.6 15.3 Other Current Liabilities as a % of Revenue 12%
Long-Term Debt 50.0 50.0 50.0 50.0 50.0 50.0
Stockholders' Equity
Common Stock 50.0 50.0 50.0 50.0 50.0 50.0
Retained Earnings 100.0 124.7 151.0 179.2 209.1 241.0
Total Liabilities and Equity 220.0 241.2 268.4 297.3 328.2 361.0
Historical Projected
2009 2010 2011 2012 2013 2014
Net cash from Operating Activities NA 29.6 36.1 37.8 39.7 41.6
Net cash from Investing Activities NA (10.0) (10.0) (10.0) (10.0) (10.0)
Net cash from Financing Activities NA 0.0 0.0 0.0 0.0 0.0
Choose Either Terminal Growth Multiple (1) or Perpetuity Method (2) 1 Terminal Value= $541.1
Step Four: Discount Cash Flows Back to Year 0 Using WACC as the Discount Rate
Terminal
2010 2011 2012 2013 2014 Value
Cash Flow 22.3 28.8 30.5 32.4 34.3 541.1
Present Value of Cash Flow 20.4 24.1 23.4 22.7 21.9 346.3
Step Five: Only if you are looking to calculate a price per share