Prepare a cashflow/income statement

Exhibit 12.5: Ganado Germany's Valuation: Baseline Analysis Assumptions 2014 2015 2016 2017 2018 Sales volume (units) 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Sales price per unit 12.80 12.80 12.80 12.80 12.80 Direct cost per unit 9.60 9.60 9.60 9.60 9.60 German corporate tax rate 29.5% 29.5% 29.5% 29.5% 29.5% Exchange rate ($/) 1.2000 1.2000 1.2000 1.2000 1.2000 Income Statement 2014 2015 2016 2017 2018 Sales revenue 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 Direct cost of goods sold - 9,600,000 -9,600,000 -9,600,000 -9,600,000 -9,600,000 Cash operating expenses (fixed) -890,000 -890,000 -890,000 -890,000 -890,000 Depreciation -600,000 -600,000 -600,000 -600,000 -600,000 Pretax profit 1,710,000 1,710,000 1,710,000 1,710,000 1,710,000 Income tax expense -504,450 -504,450 -504,450 -504,450 -504,450 Net income 1,205,550 1,205,550 1,205,550 1,205,550 1,205,550 Cash Flows for Valuation Net income 1,205,550 1,205,550 1,205,550 1,205,550 1,205,550 Add back depreciation 600,000 600,000 600,000 600,000 600,000 Changes in net working capital 0 0 0 0 0 Free cash flow for valuation, in euros 1,805,550 1,805,550 1,805,550 1,805,550 1,805,550 Cash flow from operations, in dollars $2,166,660 $2,166,660 $2,166,660 $2,166,660 $2,166,660 Present Value @ 15% $7,262,980 Notes: We assume, to simplify the analysis, that Ganado Germany has no debt and therefore no interest expenses. We also assume there are no additional capital expenditures required over the five years shown. We also assume no terminal value; Ganado is valued on its coming expected five years of cash flow only. Net working capital requirements require no additions in the base case due to constant sales. In subsequent scenarios it is assumed receivables are maintained at 45 days of sales, inventory at 10 days of cost of goods sold, and accounts payable at 38 days of sales. Measuring Operating Exposure: Ganado Germany (3 of 7) Case 2: Volume IncreasesOther Variables Remain Constant Assume that, following the depreciation in the euro, sales within Europe increase by 40%, to 1,400,000 units (all other variables remain constant) The depreciation has now made German-made telecom components more competitive with imports Additionally, export volume increases because German-made components are now cheaper in countries whose currencies have not weakened The sales price is kept constant in euro terms because management of Ganado Germany has not observed any change in local German operating costs and because it sees an opportunity to increase market share Ganado Germany's net income rises to 2,107,950, and operating cash flows the first year rise to 2,504,553 after a one-time increase in net working capital of 203,397 Operating cash flow is 2,707,950 per year for the following four years The present value of Ganado Germany has risen by $1,637,621 over baseline to $8,900,601 Exhibit 12.5: Ganado Germany's Valuation: Baseline Analysis Assumptions 2014 2015 2016 2017 2018 Sales volume (units) 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Sales price per unit 12.80 12.80 12.80 12.80 12.80 Direct cost per unit 9.60 9.60 9.60 9.60 9.60 German corporate tax rate 29.5% 29.5% 29.5% 29.5% 29.5% Exchange rate ($/) 1.2000 1.2000 1.2000 1.2000 1.2000 Income Statement 2014 2015 2016 2017 2018 Sales revenue 12,800,000 12,800,000 12,800,000 12,800,000 12,800,000 Direct cost of goods sold - 9,600,000 -9,600,000 -9,600,000 -9,600,000 -9,600,000 Cash operating expenses (fixed) -890,000 -890,000 -890,000 -890,000 -890,000 Depreciation -600,000 -600,000 -600,000 -600,000 -600,000 Pretax profit 1,710,000 1,710,000 1,710,000 1,710,000 1,710,000 Income tax expense -504,450 -504,450 -504,450 -504,450 -504,450 Net income 1,205,550 1,205,550 1,205,550 1,205,550 1,205,550 Cash Flows for Valuation Net income 1,205,550 1,205,550 1,205,550 1,205,550 1,205,550 Add back depreciation 600,000 600,000 600,000 600,000 600,000 Changes in net working capital 0 0 0 0 0 Free cash flow for valuation, in euros 1,805,550 1,805,550 1,805,550 1,805,550 1,805,550 Cash flow from operations, in dollars $2,166,660 $2,166,660 $2,166,660 $2,166,660 $2,166,660 Present Value @ 15% $7,262,980 Notes: We assume, to simplify the analysis, that Ganado Germany has no debt and therefore no interest expenses. We also assume there are no additional capital expenditures required over the five years shown. We also assume no terminal value; Ganado is valued on its coming expected five years of cash flow only. Net working capital requirements require no additions in the base case due to constant sales. In subsequent scenarios it is assumed receivables are maintained at 45 days of sales, inventory at 10 days of cost of goods sold, and accounts payable at 38 days of sales. Measuring Operating Exposure: Ganado Germany (3 of 7) Case 2: Volume IncreasesOther Variables Remain Constant Assume that, following the depreciation in the euro, sales within Europe increase by 40%, to 1,400,000 units (all other variables remain constant) The depreciation has now made German-made telecom components more competitive with imports Additionally, export volume increases because German-made components are now cheaper in countries whose currencies have not weakened The sales price is kept constant in euro terms because management of Ganado Germany has not observed any change in local German operating costs and because it sees an opportunity to increase market share Ganado Germany's net income rises to 2,107,950, and operating cash flows the first year rise to 2,504,553 after a one-time increase in net working capital of 203,397 Operating cash flow is 2,707,950 per year for the following four years The present value of Ganado Germany has risen by $1,637,621 over baseline to $8,900,601