Corporate Financial Management Discounted Cash Flow Assignment Monro, Inc. (MNRO) provides automotive undercar repair, and tire sales and services in the United States. It offers range of state inspections services on passenger cars, light trucks, and vans; products and services for brakes; mufflers and exhaust systems; and steering, drive train, suspension, and wheel alignment. The company also provides maintenance services, including oil change, heating and cooling system flush and fill service, belt installation, fuel system service, and a transmission flush and fill service. In addition, it replaces and services batteries, starters, and alternators; and offers inspection and air conditioning services. The company operates its stores under the brand names of Monro Auto Service and Tire Centers, Tread Quarters Discount Tire Auto Service Centers, Mr. Tire Auto Service Centers, Tire Choice Auto Service Centers, and Car-X Tire & Auto. As of March 28, 2020, it operated 1,283 company-operated stores, 98 franchised locations, eight wholesale locations, and two dealer-operated stores in 32 states. Monro, Inc. was founded in 1957 and is headquartered in Rochester, New York. As of 11/01/2020, Monro had 33.3 million shares of common stock outstanding and a market capitalization (MVE) of $1,383.0 million. The firms stock has a beta of 1.08. You have been hired as a financial consultant to perform a discounted cash flow valuation of the company using a 2 stage, unlevered free cash flow approach. Please use the information provided on the following pages to complete your assignment. Your valuation date should be 11/01/2020. Summary of recent results and financial position: (in $millions) As of 11/01/2020 Monro had total outstanding debt of $839.9 million and excess cash of $81.5 million. The interest rate on the firms debt (cost of debt) is 4.75%. Monro has no outstanding preferred stock or minority interest. Management guidance: Monros management team has given you the following estimates for the fiscal years ending 9/30, to use as the basis for your valuation. Beyond 2025, the firm expects that it will achieve a stable long term cash flow growth rate of 3.0% in perpetuity. (Gordon growth rate) Market Information: The yield on the 10 year US Treasury note was 1.23% on 11/01/2020. The expected equity market risk premium is 5.25%. Assignment Instructions: Using an Excel spreadsheet please prepare a discounted unlevered free cash flow valuation of Monro as of 11/01/2020. Please be sure to estimate the companys: 1. Implied intrinsic enterprise value 2. Implied intrinsic total equity value, and, 3. Implied intrinsic share value Please make sure to highlight your answers in easily identifiable and highlighted cells. Please also be sure to show any work related to your determination of the discount rate used in your analysis as well as the projected cash flows used in your valuation.

For the 12 months ended 9/30. 2019 2020 Revenue Cost of Goods Sold Gross Profit SG&A Expenses Operating Income, EBIT 1,257.7 760.2 497.5 1,151.0 732.6 418.4 341.3 77.1 348.8 148.7 134.3 95.6 58.9 72.5 Capital Spending Depreciation Operating Capital Investment Net Investment 5.1 6.3 29.4 80.5 Tax Rate 22.1% 22.6% 2021E 2022E 2023E 2024E 2025E 3.0% 5.0% 8.0% 8.0% 8.0% 7.5% 8.0% 9.0% 9.0% 9.0% Revenue Growth EBIT Margin Capex % of Revenue Operating Capital Investment D&A % of Revenue 9.0% 9.0% 9.0% 9.0% 9.0% $5.0 $5.0 $5.0 $5.0 $5.0 7.0% 7.0% 7.0% 7.0% 7.0% Tax Rate 23.0% 23.0% 23.0% 23.0% 23.0% For the 12 months ended 9/30. 2019 2020 Revenue Cost of Goods Sold Gross Profit SG&A Expenses Operating Income, EBIT 1,257.7 760.2 497.5 1,151.0 732.6 418.4 341.3 77.1 348.8 148.7 134.3 95.6 58.9 72.5 Capital Spending Depreciation Operating Capital Investment Net Investment 5.1 6.3 29.4 80.5 Tax Rate 22.1% 22.6% 2021E 2022E 2023E 2024E 2025E 3.0% 5.0% 8.0% 8.0% 8.0% 7.5% 8.0% 9.0% 9.0% 9.0% Revenue Growth EBIT Margin Capex % of Revenue Operating Capital Investment D&A % of Revenue 9.0% 9.0% 9.0% 9.0% 9.0% $5.0 $5.0 $5.0 $5.0 $5.0 7.0% 7.0% 7.0% 7.0% 7.0% Tax Rate 23.0% 23.0% 23.0% 23.0% 23.0%