Appendix 1 Sample Valuation Using Comparables Fill in the colored cells with your own calculation (cell should contain formula) Happy Healthcare Community Health Private Health Balance Sheet Assets 160 300 380 Long-Term Debt 5 100 0 Net Worth 80 120 175 Income Statement Revenues 350 420 850 EBITDA 45 55 130 Net Income 30 20.0 75.0 Market Data Earnings per Share ($/share) 3.00 0.67 2.14 Price-Earnings Ratio (times) n/a 21.0 14.5 Shares Outstanding (m) Number of Members 10 500,000 30 600,000 35 1,100,000 Private Health Happy Healthcare Community Health Average Implied Value ($M) Price-Earnings Ratio 21.0 14.5 17.75 533 Enterprise Value/EBITDA 9.49 8.35 8.92 397 Enterprise Value/Sales 1.24 1.28 1.26 436 Market Value/Book Value of 3.52 6.21 4.86 389 Equity Enterprise Value/Member 870 987 929 459 Appendix 2 Sample Valuation Using the Net Present Value Method Fill in the colored cells with your own calculation (cell should contain formula) For certain special numbers, such as "0" or "365" you can enter them manually without showing formula; Also note that the order of finishing these cells are not necessarily from top to bottom. Year 1 Year 2 Year 3 Year 4 Year 5 Year Year Year Year 9 6 7 8 Revenues Costs 100 140 210 250 290 380 500 650 900 230 240 260 275 290 310 350 400 470 EBIT -130 -100 -50 -25 0 70 150 250 430 WACC Calculation Tax Rate 40% Rm - Rf 7.5% EN 100% Bu 1.2 10 Year Treasury 6.0% Bond WACC 15.00% Cash Flows Terminal Growth Rate 3.0% Year 0 2 3 4 5 6 7 8 Revenues 100 140 210 250 290 380 500 650 900 Less: Costs 230 240 260 275 290 310 350 400 470 EBIT -130 -100 -50 -25 Less: Tax 0 0 0 0 EBIAT -130 -100 -50 -25 Less: Ch. NWC 10 4 7 Free Cash Flow -140 -104 -57 4 -29 50044 70 150 250 430 0 0 26 172 70 150 224 258 9 12 15 25 -4 61 138 209 233 Discount Factor 0.870 0.756 0.658 PV (Cash Flow) -122 -79 -37 -17 0.572 0.497 0.432 0.376 -2 26 52 0.327 0.284 68 66 PV (Cash Flows) (44) Terminal Value PV (Terminal Value) 2000 569 Net Present Value and Sensitivity PV (Cash Flows) (44) PV (Terminal 569 Matuedesent Value 525 Tax Calculation EBIT NOLs Used NOLS Added Tax WACC 525 13% 15% 17% Terminal 2% Growth 3% already created you finish generated welcome to del Rate 4% -130 -100 -50 -25 0 0 0 0 130 100 50 25 0 0 0 0 OOOO 0 70 150 250 430 certain cells 0 70 150 185 0 MIN an 0 0 0 0 0 formulas. Also 0 0 0 26 172 Beginning NOLS Ending NOLs 100 230 330 230 330 380 405 405 335 380 405 405 335 185 0 185 0 0 Net Working Capital (10% sales) Beg NWC End NWC Ch. NWC 0 10 14 10 14 21 10 4 7 21 25 29 4 327 25 38 4 29 29 38 50 12 585 50 65 65 90 15 25