All the formulas are built into the excel file so when you go over a cell, you can track how the calculation for each number on the sheet is done.

Pay special attention to the financial ratios, growth assumptions, calculation of the free cash flows for the foreseeable future (5 years) and the calculation of the terminal value. These future free cash flows are then discounted back to time zero using the discount rate (WACC).

Once you feel comfortable on the model and the solutions to the case, I want you to answer the following questions to complete your project assignment:

Using the provided financial statements as a starting point:

The DCF valuation and pro forma financials with five years of forecasted growth rates are provided in the original model. Please modify the model to consider a more successful scenario where Wok Yows sales grow at a more aggressive pace of 40% for five years and then flatten to a more sustainable growth rate of 7%. What would the stock value per share be under the new scenario? What kind of strategic changes you would make in the business model to justify the growth assumption? How would you do things differently? You can use fictional events to justify your assumptions.

Prepare and present DCF valuations and pro forma financial statements (five-year explicit period) that justify a $31 and a $56 share price. You can play with the model assumptions to get to these valuations. Propose two different business plans that would be targeting these two different outcomes. Make sure the ratios embedded in your projections conform to reasonable operating ratio assumptions in the models. Also remember that higher risk business strategies come with higher expected returns.

Discuss the $31 and $56 IPO prices for Wok Yow within the context of comparable firms and their multiples. You can use some outside reference materials from companies in similar industries for comparison purposes. Then take a position on whether you would recommend the $31 or $56 IPO. Which one is more feasible? Take a position on which of the two business plans you would invest in as an investor, which financial instrument of the company you would want to invest in and what kind of a return you would expect on your money.

Prepare an executive summary discussing the events and decisions leading to its current situation, the options it currently has moving forward, and your recommendations for Wok Yows near future. The events in the summary will be fictional.

16.7% 6.0% 20.0% 16.7% WOK YOW IMPORTS, INC. Enterprise (Entity) Valuation Solution [Parts A through G]: Chapter 14 Mini Case % of Thousands of Dollars] 2016 Actual NOPAT Statements Sales 2016 Net Sales 100.0% 150.0 Cost of Goods Sold -50.0% -75.0 Gross Profit 50.0% 75.0 SG&A Expenses -20.0% -30.0 Depreciation -5.0% -7.5 EBIT 25.0% 37.5 Interest 0.0% 0.0 EBT 25.0% 37.5 Taxes (40% rate) -10.0% - 15.0 NOPAT 15.0% 22.5 Percent Change in Net Sales 33.3% 25.0% 20.0% Pro forma ----- 2017 2018 2019 200. 0 2 50.0 300.0 -100.0 125.0 -150.0 100.0 125.0 150.0 40.0 -50.0 -60.0 -10.0 -12.5 -15.0 50.0 62.5 75.0 0.0 50.0 625 75.0 20.0 25.0 30.0 30.0 37.5 45.0 2020 350.0 -175.0 175.0 -70.0 -17.5 37.5 0.0 87.5 35.0 52.5 525 2021 371.0 -185.5 185.5 -74.2 -18.6 92.8 0.0 92.8 -37.1 55.7 Percent Change in Net Sales 33.3% 25.0% Percent of Net Sales 2016 2017 2018 100.0% 100.0% 100.0% -50.0% -50.0% -50.0% 50.0% 50.0% 50.0% -20.0% -20.0% -20.0% -5.0% -5.0% -5,0% 25.0% 25.0% 25.0% 0.0% 0.0% 25.0% 25.0% 25.0% -10.0% -10.0% -10.0% 15.0% 15.0% 15.0% 2019 100.0% -50.0% 50.0% -20.0% -5.0% 25.0% 2020 100.0% -50.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 0.0 0.0 25.0% -10.0% 15.0% 33.3% -16.7% 50.0 25.0 25.0 66.7 33.3 33.3 8.3 83.3 -41.7 41.7 9.3 100.0 -50.0 50.0 3.3 116.7 -58.3 58.3 3.3 123.7 -61.8 61.8 3.5 Required Net Working Capital: Reg Cash-Receivables+Inventories Minus: Payables Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule: Net Fixed Assets (NFA) Increase in NFA Plus: Depreciation CAPEX 33.3% 50.0 66.6 16.7 10.0 26.7 83.3 16.7 12.5 29.2 100.0 16.7 15.0 31.7 116.7 16.7 17.5 34.2 123.7 7.0 18.6 25.5 Free Cash Flows to Entity: NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows 30.0 10.0 -26.7 -8.3 5.0 37.5 12.5 -29.2 45.0 15.0 -31.7 -8.3 20.0 52.5 17.5 -34.2 -8.3 27.5 55.7 18.6 25.5 -3.5 45.2 12.4 5.0 12.4 20.0 376.3 403.8 Terminal Value CF (r = 18, g =.06) Total Free Cash Flows (TFCF) PV of TFCF (18% Discount Rate) Less: LTD Value Equity Value Value Per Share (10,000 shares) $233.6 $30.0 $203.6 $20.36 WOK YOW HPORTS, INC. Enterprise (Entity) Valuation Solution Parts A through G Chapter 14 Mini Case X of = E7-D7YD7 = F7ETYET = {G7-F7YFT 2016 ales 2016 Thousands of Dolars) NOPAT Statements Net Sales Cost of Goods Sold Gross Pro SG&A Expenses Depreciation T hterest Percent Chang =D7-C7YC7 = E7-D7YD7 4F7ETYE? = (G7F7YFT - [H7-G7YG7 Actual Pro forn 2017 2018 2019 2020 2021 150 200 250 300 350 =+G7 1.05 =+C7*1.5 =+-D741.5 =+E70.5 =F740.5 =+G740.5 =+H7 1.5 = C7+08 =+D7+D8 =+E7 E8 =#F7F8 =+G7+G8 =+H7+118 =C740.2 =+D740.2 =+E71.2 = FT 0.2 =+-G740.2 =+H740.2 =C740.05 =+-D740.15 =+E7 0.05 =F710.05 =G740.05 =+H7 0.15 =+C94C10-C11 =+D9+D10+D11 = E9+E10 E11 =+F9 F10 F11 =+G9 G10G11 =+19+H10 H11 =+C8/C7 = CC7 =+C10/C7 =+C11/07 =+C12/C7 Percent Change =+D7-C7YC7 Percent of NetS 2016 2017 =HC7/07) =D7/07) =+C8/C7 = DD7 = C/C7 =+D9D7 =+C10/C7 =+D10D7 =+C11/07 =+D11 D7 =+C12/C7 =+D1207 =+C13C7 =+D13D7 =+C14/07 =+D144D7 +CECT =+D15D7 =+C16/C7 =+D1607 2018 =HETET =+EXET =+EWET =+E1WET =+E11E7 =+E12 ET =1E13ET =+E14ET =+E15ET =+E16/ET 2019 = FIFT =+F8FT = FYFT =+F10FT =+F11FT =+F12F7 = F13FT =+F14/F7 =F15FT =+F16/17 2020 =HG7/G7 =+GY/G7 =+G9G7 =+G104G7 =+G11 G7 =+G12/G7 =+G13/G7 =+G14/G7 =+G15/G7 =+G16/G7 EBT Taxes (40% rate) NOPAT =+C14/C7 HCFC =+C16/07 =+C12 C13 =C1440.4 +C4HC5 =+D12 D13 =+D1470.4 D14D5 =+E12+E13 =E14 0.4 =+E14 E15 =+F12 F13 =+F1440.4 #F4+F15 =+G12 G13 =G14*0.4 =+G14 G15 =+H12+H13 =+H14*0.4 =+H114 115 =+C1907 =+C21407 =+C740.3333 =+C70.1667 =+C19 C20 = D7 0.3333 =+-D741.1657 =+D19D20 =+D21-C21 = E7 0.3333 =ET 1.1667 =+E19 F20 =+F21-D21 = 470.3333 =+FT+0.1667 =+F19 F20 =+F21-F21 =+G7*0.3333 G741.1657 =+G19G20 =+G21F21 =+H7*0.3333 =+H740.1667 =+19+420 =+421-G21 Reged Net Worting Capitat Req Cash Receivablestertores Minus: Payables+Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule Net Fixed Assets (NFA) Increase in NFA Plus: Depreciation CAPEX =+624/C7 =+C740.333 =+D740.333 =+D24-C24 =D11 =+D25+D26 =+E70.3333 =+F24-D24 =+E11 = 25 26 =F740.3333 =+24 24 =+F11 =+F25 26 =+G740.3333 =+G24 F24 =+611 =+G25+G26 =+H740.3333 =+124-G24 =+H11 =+25+126 Free Cast How to Entity: NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows =+D16 =+E16 =+F16 =+G16 =+H16 =+D11 =+E11 =+F11 =G11 =+H11 =+ D27 =+ E27 =+F27 =+G27 =+H27 =+D22 =+E22 =+F22 =+G22 =+H22 =+D16 D31+D32+=+E16+E31 E321=+F16+F31+F32+=+G16G31+G32 =+H16+H31+41324 =+ =t(134710.18-0.C =+G34+G3% E UE Terminal Value CF (r= 18. g=.06) Total Free Cash Flows (IFCF PV of TFCF (18% Discount Rate) Less: LID Value =+F34 F36 *PV10.18, 037- 16.7% 6.0% 20.0% 16.7% WOK YOW IMPORTS, INC. Enterprise (Entity) Valuation Solution [Parts A through G]: Chapter 14 Mini Case % of Thousands of Dollars] 2016 Actual NOPAT Statements Sales 2016 Net Sales 100.0% 150.0 Cost of Goods Sold -50.0% -75.0 Gross Profit 50.0% 75.0 SG&A Expenses -20.0% -30.0 Depreciation -5.0% -7.5 EBIT 25.0% 37.5 Interest 0.0% 0.0 EBT 25.0% 37.5 Taxes (40% rate) -10.0% - 15.0 NOPAT 15.0% 22.5 Percent Change in Net Sales 33.3% 25.0% 20.0% Pro forma ----- 2017 2018 2019 200. 0 2 50.0 300.0 -100.0 125.0 -150.0 100.0 125.0 150.0 40.0 -50.0 -60.0 -10.0 -12.5 -15.0 50.0 62.5 75.0 0.0 50.0 625 75.0 20.0 25.0 30.0 30.0 37.5 45.0 2020 350.0 -175.0 175.0 -70.0 -17.5 37.5 0.0 87.5 35.0 52.5 525 2021 371.0 -185.5 185.5 -74.2 -18.6 92.8 0.0 92.8 -37.1 55.7 Percent Change in Net Sales 33.3% 25.0% Percent of Net Sales 2016 2017 2018 100.0% 100.0% 100.0% -50.0% -50.0% -50.0% 50.0% 50.0% 50.0% -20.0% -20.0% -20.0% -5.0% -5.0% -5,0% 25.0% 25.0% 25.0% 0.0% 0.0% 25.0% 25.0% 25.0% -10.0% -10.0% -10.0% 15.0% 15.0% 15.0% 2019 100.0% -50.0% 50.0% -20.0% -5.0% 25.0% 2020 100.0% -50.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 0.0 0.0 25.0% -10.0% 15.0% 33.3% -16.7% 50.0 25.0 25.0 66.7 33.3 33.3 8.3 83.3 -41.7 41.7 9.3 100.0 -50.0 50.0 3.3 116.7 -58.3 58.3 3.3 123.7 -61.8 61.8 3.5 Required Net Working Capital: Reg Cash-Receivables+Inventories Minus: Payables Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule: Net Fixed Assets (NFA) Increase in NFA Plus: Depreciation CAPEX 33.3% 50.0 66.6 16.7 10.0 26.7 83.3 16.7 12.5 29.2 100.0 16.7 15.0 31.7 116.7 16.7 17.5 34.2 123.7 7.0 18.6 25.5 Free Cash Flows to Entity: NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows 30.0 10.0 -26.7 -8.3 5.0 37.5 12.5 -29.2 45.0 15.0 -31.7 -8.3 20.0 52.5 17.5 -34.2 -8.3 27.5 55.7 18.6 25.5 -3.5 45.2 12.4 5.0 12.4 20.0 376.3 403.8 Terminal Value CF (r = 18, g =.06) Total Free Cash Flows (TFCF) PV of TFCF (18% Discount Rate) Less: LTD Value Equity Value Value Per Share (10,000 shares) $233.6 $30.0 $203.6 $20.36 WOK YOW HPORTS, INC. Enterprise (Entity) Valuation Solution Parts A through G Chapter 14 Mini Case X of = E7-D7YD7 = F7ETYET = {G7-F7YFT 2016 ales 2016 Thousands of Dolars) NOPAT Statements Net Sales Cost of Goods Sold Gross Pro SG&A Expenses Depreciation T hterest Percent Chang =D7-C7YC7 = E7-D7YD7 4F7ETYE? = (G7F7YFT - [H7-G7YG7 Actual Pro forn 2017 2018 2019 2020 2021 150 200 250 300 350 =+G7 1.05 =+C7*1.5 =+-D741.5 =+E70.5 =F740.5 =+G740.5 =+H7 1.5 = C7+08 =+D7+D8 =+E7 E8 =#F7F8 =+G7+G8 =+H7+118 =C740.2 =+D740.2 =+E71.2 = FT 0.2 =+-G740.2 =+H740.2 =C740.05 =+-D740.15 =+E7 0.05 =F710.05 =G740.05 =+H7 0.15 =+C94C10-C11 =+D9+D10+D11 = E9+E10 E11 =+F9 F10 F11 =+G9 G10G11 =+19+H10 H11 =+C8/C7 = CC7 =+C10/C7 =+C11/07 =+C12/C7 Percent Change =+D7-C7YC7 Percent of NetS 2016 2017 =HC7/07) =D7/07) =+C8/C7 = DD7 = C/C7 =+D9D7 =+C10/C7 =+D10D7 =+C11/07 =+D11 D7 =+C12/C7 =+D1207 =+C13C7 =+D13D7 =+C14/07 =+D144D7 +CECT =+D15D7 =+C16/C7 =+D1607 2018 =HETET =+EXET =+EWET =+E1WET =+E11E7 =+E12 ET =1E13ET =+E14ET =+E15ET =+E16/ET 2019 = FIFT =+F8FT = FYFT =+F10FT =+F11FT =+F12F7 = F13FT =+F14/F7 =F15FT =+F16/17 2020 =HG7/G7 =+GY/G7 =+G9G7 =+G104G7 =+G11 G7 =+G12/G7 =+G13/G7 =+G14/G7 =+G15/G7 =+G16/G7 EBT Taxes (40% rate) NOPAT =+C14/C7 HCFC =+C16/07 =+C12 C13 =C1440.4 +C4HC5 =+D12 D13 =+D1470.4 D14D5 =+E12+E13 =E14 0.4 =+E14 E15 =+F12 F13 =+F1440.4 #F4+F15 =+G12 G13 =G14*0.4 =+G14 G15 =+H12+H13 =+H14*0.4 =+H114 115 =+C1907 =+C21407 =+C740.3333 =+C70.1667 =+C19 C20 = D7 0.3333 =+-D741.1657 =+D19D20 =+D21-C21 = E7 0.3333 =ET 1.1667 =+E19 F20 =+F21-D21 = 470.3333 =+FT+0.1667 =+F19 F20 =+F21-F21 =+G7*0.3333 G741.1657 =+G19G20 =+G21F21 =+H7*0.3333 =+H740.1667 =+19+420 =+421-G21 Reged Net Worting Capitat Req Cash Receivablestertores Minus: Payables+Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule Net Fixed Assets (NFA) Increase in NFA Plus: Depreciation CAPEX =+624/C7 =+C740.333 =+D740.333 =+D24-C24 =D11 =+D25+D26 =+E70.3333 =+F24-D24 =+E11 = 25 26 =F740.3333 =+24 24 =+F11 =+F25 26 =+G740.3333 =+G24 F24 =+611 =+G25+G26 =+H740.3333 =+124-G24 =+H11 =+25+126 Free Cast How to Entity: NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows =+D16 =+E16 =+F16 =+G16 =+H16 =+D11 =+E11 =+F11 =G11 =+H11 =+ D27 =+ E27 =+F27 =+G27 =+H27 =+D22 =+E22 =+F22 =+G22 =+H22 =+D16 D31+D32+=+E16+E31 E321=+F16+F31+F32+=+G16G31+G32 =+H16+H31+41324 =+ =t(134710.18-0.C =+G34+G3% E UE Terminal Value CF (r= 18. g=.06) Total Free Cash Flows (IFCF PV of TFCF (18% Discount Rate) Less: LID Value =+F34 F36 *PV10.18, 037