WOK YOW IMPORTS, INC.
Enterprise (Entity) Valuation Solution [Parts A through G]:
Chapter 14 Mini Case Percent Change in Net Sales Percent Change in Net Sales
% of 33.3% 25.0% 20.0% 16.7% 6.0% 33.3% 25.0% 20.0% 16.7%
[Thousands of Dollars] 2016 Actual Pro forma —-—————–—————–—— Percent of Net Sales
NOPAT Statements Sales 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020
Net Sales 100.0% 150.0 200.0 250.0 300.0 350.0 371.0 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold -50.0% -75.0 -100.0 -125.0 –150.0 -175.0 -185.5 -50.0% -50.0% -50.0% -50.0% -50.0%
Gross Profit 50.0% 75.0 100.0 125.0 150.0 175.0 185.5 50.0% 50.0% 50.0% 50.0% 50.0%
SG&A Expenses -20.0% -30.0 -40.0 -50.0 -60.0 -70.0 -74.2 -20.0% -20.0% -20.0% -20.0% -20.0%
Depreciation -5.0% -7.5 -10.0 -12.5 -15.0 -17.5 -18.6 -5.0% -5.0% -5.0% -5.0% -5.0%
EBIT 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 25.0% 25.0% 25.0% 25.0% 25.0%
Interest 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0% 0.0%
EBT 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 25.0% 25.0% 25.0% 25.0% 25.0%
Taxes (40% rate) -10.0% -15.0 -20.0 -25.0 -30.0 -35.0 -37.1 -10.0% -10.0% -10.0% -10.0% -10.0%
NOPAT 15.0% 22.5 30.0 37.5 45.0 52.5 55.7 15.0% 15.0% 15.0% 15.0% 15.0%
Required Net Working Capital:
Req Cash+Receivables+Inventories 33.3% 50.0 66.7 83.3 100.0 116.7 123.7
Minus: Payables+Accruals -16.7% -25.0 -33.3 -41.7 -50.0 -58.3 -61.8
Req Net Working Capital (RNWC) 25.0 33.3 41.7 50.0 58.3 61.8
Increase in RNWC 8.3 8.3 8.3 8.3 3.5
Fixed Assets Schedule:
Net Fixed Assets (NFA) 33.3% 50.0 66.6 83.3 100.0 116.7 123.7
Increase in NFA 16.7 16.7 16.7 16.7 7.0
Plus: Depreciation 10.0 12.5 15.0 17.5 18.6
CAPEX 26.7 29.2 31.7 34.2 25.5
Free Cash Flows to Entity:
NOPAT 30.0 37.5 45.0 52.5 55.7
Plus: Depreciation 10.0 12.5 15.0 17.5 18.6
Minus: CAPEX -26.7 -29.2 -31.7 -34.2 -25.5
Minus: Increase in NWC -8.3 -8.3 -8.3 –8.3 -3.5
Operating Free Cash Flows 5.0 12.4 20.0 27.5 45.2
Terminal Value CF (r =.18, g =.06) 376.3
Total Free Cash Flows (TFCF) 5.0 12.4 20.0 403.8
PV of TFCF (18% Discount Rate) $233.6
Less: LTD Value $30.0
Equity Value $203.6
Value Per Share (10,000 shares) $20.36
WOK YOW IMPORTS, INC.
Enterprise (Entity) Valuation Solution [Parts H and I]:
Percent Change in Net Sales Percent Change in Net Sales
% of 33.3% 25.0% 20.0% 16.7% 6.0% 33.3% 25.0% 20.0% 16.7%
[Thousands of Dollars] 2016 Actual Pro forma ——————————————–
Percent of Net Sales
NOPAT Statements Sales 2016 2017 2018 2019 2020 2021 2016 2017 2018 2019 2020
Net Sales 100.0% 150.0 200.0 250.0 300.0 350.0 371.0 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Goods Sold -50.0% –75.0 -100.0 -125.0 -150.0 –175.0 -185.5 -50.0% -50.0% -50.0% -50.0% -50.0%
Gross Profit 50.0% 75.0 100.0 125.0 150.0 175.0 185.5 50.0% 50.0% 50.0% 50.0% 50.0%
SG&A Expenses -20.0% –30.0 –40.0 -50.0 -60.0 -70.0 -74.2 -20.0% -20.0% -20.0% -20.0% -20.0%
Depreciation -5.0% -7.5 -10.0 -12.5 -15.0 -17.5 –18.6 -5.0% -5.0% -5.0% -5.0% -5.0%
EBIT 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 25.0% 25.0% 25.0% 25.0% 25.0%
Interest 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0% 0.0% 0.0% 0.0% 0.0%
EBT 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 25.0% 25.0% 25.0% 25.0% 25.0%
Taxes (40% rate) -10.0% –15.0 –20.0 -25.0 -30.0 -35.0 -37.1 -10.0% -10.0% -10.0% -10.0% -10.0%
NOPAT 15.0% 22.5 30.0 37.5 45.0 52.5 55.7 15.0% 15.0% 15.0% 15.0% 15.0%
Required Net Working Capital:
Req Cash+Receivables+Inventories 33.3% 50.0 66.7 83.3 100.0 116.7 123.7
Minus: Payables+Accruals -16.7% –25.0 –33.3 -41.7 -50.0 -58.3 -61.8
Req Net Working Capital (RNWC) 25.0 33.3 41.7 50.0 58.3 61.8
Increase in RNWC 8.3 8.3 8.3 8.3 3.5
Fixed Assets Schedule:
Net Fixed Assets (NFA) 33.3% 50.0 66.6 83.3 100.0 116.7 123.7
Increase in NFA 16.7 16.7 16.7 16.7 7.0
Plus: Depreciation 10.0 12.5 15.0 17.5 18.6
CAPEX 26.7 29.2 31.7 34.2 25.5
Free Cash Flows to Entity:
NOPAT 30.0 37.5 45.0 52.5 55.7
Plus: Depreciation 10.0 12.5 15.0 17.5 18.6
Minus: CAPEX -26.7 -29.2 –31.7 –34.2 –25.5
Minus: Increase in NWC -8.3 -8.3 -8.3 -8.3 -3.5
Operating Free Cash Flows 5.0 12.4 20.0 27.5 45.2
Terminal Value CF (r = .161, g = .06) 447.1
Total Free Cash Flows (TFCF) 5.0 12.4 20.0 474.6
PV of TFCF (16.1% Discount Rate) $270.1
Less: LTD Value $30.0
Equity Value $240.1
Value Per Share (10,000 shares) $24.01
Cost of Capital Worksheet:
“Comparable Firm” Risk Index 2.00
Cost of Equity Capital 0.220
A-T Cost of LTD Capital 0.072
WACC 0.161