M7 Project 1

Chang Dental

Read the instructions and the attached Excel spreadsheet thoroughly before starting the project!

Objectives:

1. Perform a qualitative analysis on a capital budgeting project.

2. Perform a valuation analysis on an existing business.

3. Perform scenario analysis (that makes business sense!)

Tasks:

1. Discuss the risks and rewards of investing in Chang Dental from Chris Millers perspective using a SWOT analysis.

2. Discuss the base case valuation provided to you.

3. Run scenario analyses on key variables using information from the case.

4. Make your final recommendation on whether or not Chris Miller should buy Chang Dental.

Tips:

Task 1: Use the information given in the case, but dont be afraid to include your own experiences with dentists in your analysis.

Task 2: Use the Excel file posted. In sheets "Exh1" and "Exh2" are the financial statement data. In sheet "Base_Case" is the completed base case valuation forecast. M7_Project_1_Class.xlsxDownload M7_Project_1_Class.xlsx

Task 3: Use the case as a guide for scenarios. Do not just randomly make scenarios. Submission Instructions:You should submit your completed work in a Word document and Excel file. M7 Project 1. class. xlsx

Chang Dental Clinic

Exhibit 1

INCOME STATEMENTS For the year ended December 31

2005. 2004. 2003. 2005. 2004. 2003

FEE REVENUE. $812,987 $600,308. $287,281 g. 35.4% 109.0%

OPERATING EXPENSES:

Associate fees 166,727 106,486. 40,098. 0.205 0.177. 0.140

Salaries and benefits 127,703. 93,868. 39,008.

Dental supplies. 62,715. 40,508 26,291 0.077. 0.067. 0.092

Equipment leasing. 52,582. 52,582 19,456 $387,00810-yearcapital of leases

Rent and utilities. 42,441. 38,500. 29,428

Laboratory fees. 21,626 10,636 186 0.027. 0.018. 0.001

General and Office 17,420 14,193 9,051

Promotion and Entertainment. 10,775 8,172 794

Automobile expenses. 5,104. 3,677. 1,337

Telephone 11,187 1,251. 4,697

Professional fees. 5,910 3,294. 5,755

Interest and bank charge. 5,630. 7,015. 13,579

Professional development. 2,913. 406 2,021

Insurance 2,778. 1,612. 849

Licenses, fees and dues. 1,843. 2,685. 1,282

Bed debts (recovered). (3,647) 17,939 339

Amortization. 14,872 10,484 8,687. 0.309. 0.263 0.232 v

TOTAL EXPENSES 548,579 413,308 202,858 368,074 F includes draw

NET INCOME. $264,408. $187,000. $84,423

Cash operating costs $191,324. $116,919. $42,701

Chang Dental Clinic

Exhibit 2

BALANCE SHEET As of December 31

2005 2004. 2003

ASSETS Current assets.

Cash. $4,067. $. $

Accounts receivable 46,942 41,248. 29,528. 0.058 0.069. 0.103

Inventory. 6,366. 5,296 2,677 0.008. 0.009. 0.009

Prepaid expenses 1,646. - - --

Total Current Assets. 59,021 46,544. 32,205

Long-term Assets

Fixed assets. $69,834. $60,625. $36,408 9209 24217

Less: Accumulated amortization.

fixed assets. (30,595). (19,171) (8,687)

Net fixed assets 39,239. 41,454. 27,721

0.022 c-factor Goodwill 1 1 1

Total Long-term Assets 39,240. 41,455 27,722

TOTAL ASSETS $98,261. $87,999 $59,927

LIABILITIES AND OWNER'S EQUITY

Liabilities Bank indebtedness $ $39. $8,201

Accounts payable 10,929 10,724 8,173. 0.013. 0.018. 0.028

Total Liabilities 10,929 10,763 16,374. 0.052. 0.060 0.084 w-factor

OWNER'S EQUITY S.

Chang, Capital. 87,332. 77,236. 43,553

TOTAL LIABILITIES AND

OWNER'S EQUITY $98,261. $87,999. $59,927