The Duke’s Sporting Goods Store
Valuation Analysis as of December 31 of the Current Year
Discounted Cash Flow Analysis
$’s In Thousands Projected (a)
FYE FYE FYE
Fiscal Year Ending
FYE FYE FYE Terminal
CY-3 CY-2 CY-1 Current Year CY+1 CY+2 CY+3 Year
Revenue $1,000 $1,200 $1,400 $1,500 $1,545 $1,591 $1,639
Cost of Goods Sold 500 600 700 750 $773 $796 $820
Gross Profit 500 600 700 750 773 796 820
SG&A 300 350 400 425 $438 $451 $464
Net Cash Flow $106 $111 $116 $122 $126
Discount Period in Years 0.00 1.00 2.00 3.00
(a)
Discount Factor
1.0000 0.8621 0.7432 0.6407 0.6407
(b) Discount Rate 16.0%
(c) Perpetual Growth Rate 3.5%
(d) Terminal Value $1,009
(e) Present Value – Cash Flow/Terminal Value $106 $96 $87 $78 $646
Net Present Value $1,013
Notes:
(a)
Reflects end-of-year discounting convention.
(b)
(d)
Forecast the Income Statement here to get
to Net Income for CY+1, CY+2, CY+3, and
Terminal Year. (Move this text box out of
the way).
Study and in the Valuation chapter. (Move
this text box out of the way).
Calculate Net Present Value. Follow the
steps on the Case Study and in the
Valuation chapter. (Move this text box out
of the way).
The Duke’s Sporting Goods Store
Valuation Analysis as of December 31 of the Current Year
Market Approach
$’s In Thousands Comparable Businesses
Charlie’s
Sporting
Goods
Jamie’s
Sporting
Goods
Total Revenues (CY) $1,000 $2,000 $5,000 1,500
Total Expenses (CY) 900 1,850 4,200 1,344
Net Income 100 150 800 156
Previous Transaction FMV 2,250
(1) % of business transacted 5% 100% 8% FMV 2,340
Transaction Price $60 $3,000 $500 FMV (final) 2,300
Date of Transaction CY CY CY
(2) % of business transacted 100% NA NA
Transaction Price $1,500 NA NA
Date of Transaction CY-2 NA NA
Current Assets (minus inventory) 100 250 500 125
Current Liabilities 100 150 2,000 150
Current Ratio 4.0 5.3 1.0 3.5
Quick Ratio 1.0 1.7 0.3 0.8
Net Profit Margin 0.10 0.08 0.16 0.10
P/R Ratio 1.5 1.5 1.56 1.50
P/E Ratio 15.0 20.0 9.77 15.0
Assets
Cash $100,000
Inventory $200,000
A/R $10,000
Liabilities