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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Assumptions:
Sales Growth Rate % 0.508 0.450 0.400 0.400 0.400 0.350 0.300 0.250 0.200 0.150 0.100
Operating Margin % of Sales -0.02 -0.01 -0.01 0.02 0.04 0.08 0.1 0.12 0.15 0.15 0.15
Depreciation Exp. % of Sales 0.036 0.034 0.06 0.06 0.06 0.06 0.06 0.07 0.07 0.07 0.06
Marginal Tax Rate %10.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4
Terminal Period Growth Rate % 0.05
Working Capital ($Mil) 112.8 126.4
Cash/Short-Term Investments 103.7 111.2
Minimum Cash (5% of Sales) 8.4 12.65
W Cap Excl. Excess cash 17.5 27.85
Selected Financial Data ($Mil.)
Sales 168
Excess Cash 98.55
Deferred Tax Assets 73.1
PV of Operating Leases622.0
Number of Shares Outstanding 61.8
Valuation:
Sales 168.4 244.2 341.9 478.7 670.2 904.7 1176.2 1470.2 1764.3 2028.9 2231.8
Equals: Enterprise Cash Flow -13.3 -15.2 -17.5 -16.5 1.9 19.9 76.5 129.4 176.4 180.6
PV (2010 - 2019) 0.4
Terminal Value 2889.1
Total Operating Value 2889.5
Plus:
Excess Cash 98.6
Equals: Equity Value 3038.7
Number of Shares 61.8
Equity Value Per Share 49.2
Explanatory Notes:
Projections
Case Study 7-1 Hewlett-Packard's Valuaton of 3PAR
2Excludes 3PAR excess cash balances.
1A 40% marginal tax rate is used to reflect the full benefit of the 3PAR deferred tax assets to HP.
long-term debt.
7Net Working Capital 17.5 27.85 34.19 47.87 67.02 90.47 117.62 147.02 176.43 202.89 223.18
6PV of annual operating lease expenses discounted at 7% the firm's estimated cost of debt.
5The cost of equity for comparable firms.
