Chapter 18 The Leveraged Buyout of Cheek Products, Inc. Input area: $ Sales Costs Depreciation EBT Tax Net income 2019 2020 2021 2022 2023 3,024.00 $ 3,391.00 $ 3,654.00 $ 3,740.00 $ 3,893.00 804.00 1,055.00 1,110.00 1,200.00 1,264.00 534.00 568.00 591.00 620.00 633.00 1,686.00 $ 1,768.00 $ 1,953.00 $ 1,920.00 $ 1,996.00 354.06 371.28 410.13 403.20 419.16 1,331.94 $ 1,396.72 $ 1,542.87 $ 1,516.80 $ 1,576.84 $ $ Capital expenditures Change in NWC Asset sales $ $ $ 307 $ (134) $ 1,560 $ 266 $ (205) $ 1,131 334 $ 111 $ 339 $ 105 $ 334 119 Interest payments $ 2,120 $ 2,045 $ 2,851 $ 2,779 $ 2,875 Terminal growth rate Terminal D/E Required return on assets Pretax cost of debt Pretax debt after Year 5 Tax rate Shares outstanding (million) 3.50% 25.00% 14.00% 12.50% 8.00% 21.00% 385 Output area: Unlevered cash flows PV unlevered CF Terminal value of future unlevered CF in Year 5 Value today of terminal value Interest tax shield PV of interest tax shield Levered equity return WACC Terminal value of company Terminal value of tax shields Value of terminal tax shields today PV unlevered CF PV tax shields Value of company Share price to offer Chapter 18 The Leveraged Buyout of Cheek Products, Inc. Input area: $ Sales Costs Depreciation EBT Tax Net income 2019 2020 2021 2022 2023 3,024.00 $ 3,391.00 $ 3,654.00 $ 3,740.00 $ 3,893.00 804.00 1,055.00 1,110.00 1,200.00 1,264.00 534.00 568.00 591.00 620.00 633.00 1,686.00 $ 1,768.00 $ 1,953.00 $ 1,920.00 $ 1,996.00 354.06 371.28 410.13 403.20 419.16 1,331.94 $ 1,396.72 $ 1,542.87 $ 1,516.80 $ 1,576.84 $ $ Capital expenditures Change in NWC Asset sales $ $ $ 307 $ (134) $ 1,560 $ 266 $ (205) $ 1,131 334 $ 111 $ 339 $ 105 $ 334 119 Interest payments $ 2,120 $ 2,045 $ 2,851 $ 2,779 $ 2,875 Terminal growth rate Terminal D/E Required return on assets Pretax cost of debt Pretax debt after Year 5 Tax rate Shares outstanding (million) 3.50% 25.00% 14.00% 12.50% 8.00% 21.00% 385 Output area: Unlevered cash flows PV unlevered CF Terminal value of future unlevered CF in Year 5 Value today of terminal value Interest tax shield PV of interest tax shield Levered equity return WACC Terminal value of company Terminal value of tax shields Value of terminal tax shields today PV unlevered CF PV tax shields Value of company Share price to offer