10

PE use EBITDA as a multiple to estimate the continuation value in 2010 (reproduce Table 19.15 assuming the EBITDA multiple for ideko remains at 9.1 x Inter the sales and the univered and levered PE ratios impled by the continuation value you calculated. Also assume that Iako's production plant will require an expansion in 2010, and that the cost of this expansion 514.5 milion, will be added to deko's debt in 2010. looko's balance sheet for 2005 is shown here ideo's free cash flows through 2010 are shown here (click on the following on in order to copy its contents into a spreadsheet) Ideko Financial Ratios Comparison Mid-2005 Luxottica Sporting Ratio Oakley, Ine Group Nike, Inc Goods Industry 246 20.24 EV/Sales 22 204 18. 14 EV/EBITDA 14.5 11.5 EBITDA/Sales 17.25 18.4% 15.7% 12.2% Calculate the contin valen 2010 below (Round the door amor Continuation Value: Multiples Approach 3 000) Figure EBITOA in 2010 EBITDA Motiple TABLE 19.15 Continuation Value Estimate for del Contumon Erarprise Value SPREADSHEET Debt Continue Multiple A8 000 Contention Equily Value ESTA 2013 32004 Com Multi ITDA TOX Coton Erste 920 vor 163 Du 120.000 more 16 Enterary number in the fields and then click Check Answer Conne 1220 - Data Table ing capital that is, Ideko's working ospital requirements though 2010 will be as shown here the EBITDA multiple for de remains at 9.1 x Infer the sales and renovered and require an expansion in 2010, and that the cost of this expansion $14.5 milion will be added to 2007 2010 2005 78.200 2006 52.292 2003 103,471 2005 115.679 92373 120,000 Data Table Income Statement (5000) Sales Cost of Goods Sold Raw Materiale Direct Labor Costs Gross Profit Sales and Marketing Administrative EBITDA > 2003 Days (16,000) (17.767) 158.000) 20.490) 14200 44.035 ($1,250)(93,677 (93.500) 12.336) 19.450 10.022 15,600 15.100 13,950 12.162 (75) (0.500) 19.875 5.502 (4.600) 1.54 9.010 3620 (19,709) (21816) (24.104) 123.439) (20.756) (30.485) 491225 54.00 61.050 (16.77 (20.611) (23,795) (13.347) (14.476) 18.501 19,812 22,250 (5754) 15.659 (5,573) 12.747 14.163 10.500 (6.580) 10.500) 7573 10.115 02.1961 12.651) (2500) 4050 4.022 (20,583) (34.671) 57,840 (26,550) (16,770) 24519 10.04 17,574 16,500 10.901 MB) 74140 (Click on the following loon in order to copy its contents into a creadsheet Ideko's Working Capital Requesents Working Capital Days Assets Based on: Accounts Receivable Sales Revenue Raw Materials Haw Materials Conti Finished Goods Raw Materiais Labor Couts Minimum Ch Balance Sales Revet Liabilities Wao Payati Direct Labor. Admin Costs Or Accounts Payable Raw Materials and Marketing 2005 Days 90 45 45 30 45 45 30 CDIT interest Expense the Pretax income Income Tax 15 45 16 45 0575 Pent Net Income Done D 2005 2000 2007 2000 2000 2010 53.800 1,073 4,192 5427 20 201 2.150 4.717 22.777 2.430 5.320 31.033 3.277 25,613 2.000 5 588 8.504 28.520 2.972 6,730 9.500 (Click on the following loon in order to copy its contents into a spreadsheet ved 2005 Balance Sheet Data for deko Corporation Balance Sheet($ 000) Assets Cash and Equivalent 5,164 Accounts Receivable 53.800 Inventories 6.165 Total Current Assets 06.129 Property. Plant, and Equipment 55,000 Goodwill 72,332 Total Assets 192.261 7552 6.764 10.011 Working Capital (3 000) Assets Accounts Receivable Raw Materials Finished Goods Minimum Cash Bann Total Current Assets Labilities Wages Payable Omer Acounts Payati Total Current Liabilities Net Working Cape Increase in NelWorking Captal 7.592 36.119 66.32 47.734 12,805 53273 1,10 3,677 1,870 3.00 1.295 3,560 4,056 61.737 1,532 4,511 0.045 32.070 3,740 1,004 5.231 6925 35.770 2.114 0551 0.000 44,608 71775 30.950 Liabilities and Stockholders' Equity Accounts Payable Detit Total Liabilities Stockholders Equity Total Liabilities and Equity 4,654 100.000 104.654 3.730 (30,001) 192.261 onunda alance shee prder to copy its 2005 2006 2007 2008 2009 2010 6,575 7.146 3,628 4,277 4,922 4,277 4,277 4,277 7,905 5,860 Free Cash Flow ($ 000) Net Income Plus: After-tax Interest Expense Unlevered Net Income Plus: Depreciation Less: Increase in NWC Less: Capital Expenditures Free Cash Flow of Firm Plus: Not Borrowing Less: After-tax Interest Expense Free Cash Flow to Equity 4,009 11.277 8,286 5,754 (3,340) (4,800) 5,900 lue in 2010 be 33,001 (4,800) 9,199 5,659 (3,694) (4.800) 6,364 10,852 5,573 (4,189) (4.800) 7,436 ultiples Appra 11,423 6.945 (4,649) (19,300) (5,581) 14,500 (4.277) 4,642 41,966 Value (4,277) 37,689 (4,277) 1,623 (4,277) 2,087 (4,277) 2,087 PE use EBITDA as a multiple to estimate the continuation value in 2010 (reproduce Table 19.15 assuming the EBITDA multiple for ideko remains at 9.1 x Inter the sales and the univered and levered PE ratios impled by the continuation value you calculated. Also assume that Iako's production plant will require an expansion in 2010, and that the cost of this expansion 514.5 milion, will be added to deko's debt in 2010. looko's balance sheet for 2005 is shown here ideo's free cash flows through 2010 are shown here (click on the following on in order to copy its contents into a spreadsheet) Ideko Financial Ratios Comparison Mid-2005 Luxottica Sporting Ratio Oakley, Ine Group Nike, Inc Goods Industry 246 20.24 EV/Sales 22 204 18. 14 EV/EBITDA 14.5 11.5 EBITDA/Sales 17.25 18.4% 15.7% 12.2% Calculate the contin valen 2010 below (Round the door amor Continuation Value: Multiples Approach 3 000) Figure EBITOA in 2010 EBITDA Motiple TABLE 19.15 Continuation Value Estimate for del Contumon Erarprise Value SPREADSHEET Debt Continue Multiple A8 000 Contention Equily Value ESTA 2013 32004 Com Multi ITDA TOX Coton Erste 920 vor 163 Du 120.000 more 16 Enterary number in the fields and then click Check Answer Conne 1220 - Data Table ing capital that is, Ideko's working ospital requirements though 2010 will be as shown here the EBITDA multiple for de remains at 9.1 x Infer the sales and renovered and require an expansion in 2010, and that the cost of this expansion $14.5 milion will be added to 2007 2010 2005 78.200 2006 52.292 2003 103,471 2005 115.679 92373 120,000 Data Table Income Statement (5000) Sales Cost of Goods Sold Raw Materiale Direct Labor Costs Gross Profit Sales and Marketing Administrative EBITDA > 2003 Days (16,000) (17.767) 158.000) 20.490) 14200 44.035 ($1,250)(93,677 (93.500) 12.336) 19.450 10.022 15,600 15.100 13,950 12.162 (75) (0.500) 19.875 5.502 (4.600) 1.54 9.010 3620 (19,709) (21816) (24.104) 123.439) (20.756) (30.485) 491225 54.00 61.050 (16.77 (20.611) (23,795) (13.347) (14.476) 18.501 19,812 22,250 (5754) 15.659 (5,573) 12.747 14.163 10.500 (6.580) 10.500) 7573 10.115 02.1961 12.651) (2500) 4050 4.022 (20,583) (34.671) 57,840 (26,550) (16,770) 24519 10.04 17,574 16,500 10.901 MB) 74140 (Click on the following loon in order to copy its contents into a creadsheet Ideko's Working Capital Requesents Working Capital Days Assets Based on: Accounts Receivable Sales Revenue Raw Materials Haw Materials Conti Finished Goods Raw Materiais Labor Couts Minimum Ch Balance Sales Revet Liabilities Wao Payati Direct Labor. Admin Costs Or Accounts Payable Raw Materials and Marketing 2005 Days 90 45 45 30 45 45 30 CDIT interest Expense the Pretax income Income Tax 15 45 16 45 0575 Pent Net Income Done D 2005 2000 2007 2000 2000 2010 53.800 1,073 4,192 5427 20 201 2.150 4.717 22.777 2.430 5.320 31.033 3.277 25,613 2.000 5 588 8.504 28.520 2.972 6,730 9.500 (Click on the following loon in order to copy its contents into a spreadsheet ved 2005 Balance Sheet Data for deko Corporation Balance Sheet($ 000) Assets Cash and Equivalent 5,164 Accounts Receivable 53.800 Inventories 6.165 Total Current Assets 06.129 Property. Plant, and Equipment 55,000 Goodwill 72,332 Total Assets 192.261 7552 6.764 10.011 Working Capital (3 000) Assets Accounts Receivable Raw Materials Finished Goods Minimum Cash Bann Total Current Assets Labilities Wages Payable Omer Acounts Payati Total Current Liabilities Net Working Cape Increase in NelWorking Captal 7.592 36.119 66.32 47.734 12,805 53273 1,10 3,677 1,870 3.00 1.295 3,560 4,056 61.737 1,532 4,511 0.045 32.070 3,740 1,004 5.231 6925 35.770 2.114 0551 0.000 44,608 71775 30.950 Liabilities and Stockholders' Equity Accounts Payable Detit Total Liabilities Stockholders Equity Total Liabilities and Equity 4,654 100.000 104.654 3.730 (30,001) 192.261 onunda alance shee prder to copy its 2005 2006 2007 2008 2009 2010 6,575 7.146 3,628 4,277 4,922 4,277 4,277 4,277 7,905 5,860 Free Cash Flow ($ 000) Net Income Plus: After-tax Interest Expense Unlevered Net Income Plus: Depreciation Less: Increase in NWC Less: Capital Expenditures Free Cash Flow of Firm Plus: Not Borrowing Less: After-tax Interest Expense Free Cash Flow to Equity 4,009 11.277 8,286 5,754 (3,340) (4,800) 5,900 lue in 2010 be 33,001 (4,800) 9,199 5,659 (3,694) (4.800) 6,364 10,852 5,573 (4,189) (4.800) 7,436 ultiples Appra 11,423 6.945 (4,649) (19,300) (5,581) 14,500 (4.277) 4,642 41,966 Value (4,277) 37,689 (4,277) 1,623 (4,277) 2,087 (4,277) 2,087