N o P Q R B G H J M DONNA'S BALANCE SHEET AND INCOME STATEMENT Value Drivers Sales growth 15% Current assets/sales 20% This sheet contains Donna Company's B/S, US and value drivers. Assume that Donna Company pays $6,000 of its debt Current liabilities/sales 14% every year and that the interest rate, paid and earned, is on average debt and cash balance, respectively, and the Net fixed assets/sales 80% depreciation is on average fixed assets. Construct a 5-year pro forma model for Donna Company and compute free cash Costs of goods sold/sales 45% flows Depreciation rate Assume that the firm's terminal value growth rate is 3% and cost of capital is 15%, find the value of equity. Perform a 10% sensitivity analysis with cost of capital: 10%, 15% and 20%; terminal growth rate: 1%, 3%, and 5%. Interest rate on debt 8% Interest eamed on average cash balances 5% Tax rate 36% Dividend payout ratio 30% Annual debt repayments 6,000 1 2 3 4 5 Income statement Year Sales Cost of goods sold (COGS) Depreciation Interest on cash Interest payments on debt Profit before tax Tax (36%) Profit after tax Dividend Retained eamings 0 45,000 -33,000 4,000 80 -150 7,930 -2.855 5,075 -1,523 3,553 10,000 4,700 Balance sheet Assets Cash Current assets Fixed assets At cost Accumulate depreciation Net Fixed assets Total assets 47,000 -14.000 33,000 47,700 4,000 30.000 Llabilities and Equity Current liabilities Debt Equity Equity Accumulated retained earings Total liabilities and equity 10,000 3,700 47,700 Free cash flow calculation Year 0 1 2 3 4 5 Free cash flow N o P Q R B G H J M DONNA'S BALANCE SHEET AND INCOME STATEMENT Value Drivers Sales growth 15% Current assets/sales 20% This sheet contains Donna Company's B/S, US and value drivers. Assume that Donna Company pays $6,000 of its debt Current liabilities/sales 14% every year and that the interest rate, paid and earned, is on average debt and cash balance, respectively, and the Net fixed assets/sales 80% depreciation is on average fixed assets. Construct a 5-year pro forma model for Donna Company and compute free cash Costs of goods sold/sales 45% flows Depreciation rate Assume that the firm's terminal value growth rate is 3% and cost of capital is 15%, find the value of equity. Perform a 10% sensitivity analysis with cost of capital: 10%, 15% and 20%; terminal growth rate: 1%, 3%, and 5%. Interest rate on debt 8% Interest eamed on average cash balances 5% Tax rate 36% Dividend payout ratio 30% Annual debt repayments 6,000 1 2 3 4 5 Income statement Year Sales Cost of goods sold (COGS) Depreciation Interest on cash Interest payments on debt Profit before tax Tax (36%) Profit after tax Dividend Retained eamings 0 45,000 -33,000 4,000 80 -150 7,930 -2.855 5,075 -1,523 3,553 10,000 4,700 Balance sheet Assets Cash Current assets Fixed assets At cost Accumulate depreciation Net Fixed assets Total assets 47,000 -14.000 33,000 47,700 4,000 30.000 Llabilities and Equity Current liabilities Debt Equity Equity Accumulated retained earings Total liabilities and equity 10,000 3,700 47,700 Free cash flow calculation Year 0 1 2 3 4 5 Free cash flow
