DATAMETRIX, INC. [Enterprise Valuation Method]
Ch 14, Prob 16
Actual Projected ——————————————>I
Percent Sales Increase——> 30.0% 30.0% 30.0% 7.0%
% of 2016 [Thousands of Dollars]
Income Statements Sales 2016 2017 2018 2019 2020
Sales 100.0% 20000 26000 33800 43940 47016
Cost of goods sold -50.0% -10000 -13000 -16900 -21970 -23508
Gross profit 50.0% 10000 13000 16900 21970 23508
Operating expenses -7500 -9188 -11255 -13787 -14752
Depreciation -2.0% -400 -520 -676 -879 -940
EBIT 2100 3293 4969 7304 7816
Interest -0.5% -100 -130 -169 -220 -235
EBT 2000 3163 4800 7085 7580
Taxes (40%) -800 -1265 -1920 -2834 -3032
Balance Sheets
Gross fixed assets 5400 7420 10046 13460 15169
Accumulated depreciation -400 -920 -1596 -2475 -3415
Net fixed assets 25.0% 5000 6500 8450 10985 11754
Total assets 50.0% 10000 12948 17193 23218 28304
Retained earnings 1200 3098 5978 10228 14777
Total equity 6500 8398 11278 15528 20077
Total liabilities & equity 10000 12948 17193 23218 28304
DATAMETRIX, INC. [Enterprise Valuation Method]
Work Sheet for Estimating Free Cash Flows to the Enterprise:
Income Statement Flows:
NOPAT 1976 2982 4383 4689
Depreciation 520 676 879 940
Required Net Working Capital:
Required Cash 1000 1300 1690 2197 2351
Accounts Receivable 2000 2600 3380 4394 4702
Accrued liabilities -1000 -1300 -1690 -2197 -2351
Required NWC 2500 3250 4225 5493 5877
Increase in Required NWC 750 975 1268 384
Capital Expenditures (CAPEX):
Increase in net fixed assets 1500 1950 2535 769
Depreciation 520 676 879 940
Increase in gross fixed assets 2020 2626 3414 1709
Free Cash Flows to Enterprise:
2016 2017 2018 2019 2020
NOPAT 1976 2982 4383 4689
Plus: Depreciation 520 676 879 940
Less: Increase in Required NWC -750 -975 -1268 -384
Less: CAPEX (Inc in GFA) -2020 -2626 -3414 -1709
Annual Free Cash Flows -275 57 580 3536
Horizon Cash Flow Value (18% disc rate) 32144
Total Free Cash Flows to Enterprise -275 57 32724
PV of Operations (35% disc rate)
$13,128
Plus: Existing Surplus Cash
$0
Market Value of Firm
$13,128
Less: Long-term Debt
$1,000
Market Value of Equity
$12,128
Per Share Value (1 million shares)
$12.13