PROFIT AND CASH FLOW FORECAST BY FEDERAL (In $000s) 2008 260,548 75.0% 2009 364,768 40.0% 2010 455,960 25.0% 2011 569,950 25.0% 2012 712,437 25.0% Profit forecast Net sales Growth rate Cost of goods sold Lease payments Other cost of goods sold Total cost of goods sold COGS as a percentage of sales Gross profit Gross profit as a percentage of sales Selling, General & administrative expenses S&A as a percentage of sales EBITDA EBITDA as a percentage of sales Depreciation & amortization* EBIT EBIT as a percentage of sales Interest expense EBT Taxes Taxes as a percentage of EBT Net profit Net profit as a percentage of sales Number of stores Store network growth rate Sales per store 35,100 89,963 125,063 48.0% 135,485 52.0% 95,100 36.5% 40,385 15.5% 8,117 32,268 12.4% 49,725 114,421 164, 146 45.0% 200,622 55.0% 115,267 31.6% 85,356 23.4% 14,569 70,786 19.4% 63,509 141,673 205,182 45.0% 250,778 55.0% 136,788 30.0% 113,990 25.0% 20,673 93,317 20.5% 79,386 177,092 256,477 45.0% 313,472 55.0% 170,985 30.0% 142,487 25.0% 25,311 117,176 20.6% 99,232 221,364 320,597 45.0% 391,840 55.0% 213,731 30.0% 178,109 25.0% 28,836 149,273 21.0% 32,268 9,680 30.0% 22,588 8.7% 70,786 21,236 30.0% 49,550 13.6% 93,317 27,995 30.0% 65,322 14.3% 117,176 35,153 30.0% 82,023 14.4% 149,273 44,782 30.0% 104,491 14.7% 84 42.4% 3,102 119 41.7% 3,065 152 27.7% 3,000 190 25.0% 3,000 237 25.0% 3,000 Cash flow forecast Net income Depreciation & amortization Expansion capital expeditures Increase (decrease) in working capital** Net cash flow 2008 22,588 8,117 (30,000) (6,365) (5,660) 2009 49,550 14,569 (40,000) (5,941) 18,179 2010 65,322 20,673 (40,000) (5,198) 40,797 2011 82,023 25,311 (40,000) (6,497) 60,837 2012 104,491 28,836 (40,000) (8,122) 85,206 *The depreciation & amortization is estimated at 20% of gross fixed assets, with a 50% inclusion rate in the first year for new additions **Increases in working capital per year are based on turnover of receivables, inventory, and payables equal to 2007 levels 6. If Lululemon were to issue $50 million worth of new common stock, what should be the suggested price range for the IPO? Use free cash flow method (as you have done in the capital budgeting cases). Present some sensitivity analyses. Hint: Use the net cash flows given in Exhibit 4 to start the analysis. Remember to calculate cost of capital based on given information in the case. Use CAPM method for cost of equity calculation. Find out enterprise value, firm value, equity value and share price (as you learn in the 'valuation module"). Use comparable valuation methods (see the note below). How to choose the right competitors? (compare debt level). PROFIT AND CASH FLOW FORECAST BY FEDERAL (In $000s) 2008 260,548 75.0% 2009 364,768 40.0% 2010 455,960 25.0% 2011 569,950 25.0% 2012 712,437 25.0% Profit forecast Net sales Growth rate Cost of goods sold Lease payments Other cost of goods sold Total cost of goods sold COGS as a percentage of sales Gross profit Gross profit as a percentage of sales Selling, General & administrative expenses S&A as a percentage of sales EBITDA EBITDA as a percentage of sales Depreciation & amortization* EBIT EBIT as a percentage of sales Interest expense EBT Taxes Taxes as a percentage of EBT Net profit Net profit as a percentage of sales Number of stores Store network growth rate Sales per store 35,100 89,963 125,063 48.0% 135,485 52.0% 95,100 36.5% 40,385 15.5% 8,117 32,268 12.4% 49,725 114,421 164, 146 45.0% 200,622 55.0% 115,267 31.6% 85,356 23.4% 14,569 70,786 19.4% 63,509 141,673 205,182 45.0% 250,778 55.0% 136,788 30.0% 113,990 25.0% 20,673 93,317 20.5% 79,386 177,092 256,477 45.0% 313,472 55.0% 170,985 30.0% 142,487 25.0% 25,311 117,176 20.6% 99,232 221,364 320,597 45.0% 391,840 55.0% 213,731 30.0% 178,109 25.0% 28,836 149,273 21.0% 32,268 9,680 30.0% 22,588 8.7% 70,786 21,236 30.0% 49,550 13.6% 93,317 27,995 30.0% 65,322 14.3% 117,176 35,153 30.0% 82,023 14.4% 149,273 44,782 30.0% 104,491 14.7% 84 42.4% 3,102 119 41.7% 3,065 152 27.7% 3,000 190 25.0% 3,000 237 25.0% 3,000 Cash flow forecast Net income Depreciation & amortization Expansion capital expeditures Increase (decrease) in working capital** Net cash flow 2008 22,588 8,117 (30,000) (6,365) (5,660) 2009 49,550 14,569 (40,000) (5,941) 18,179 2010 65,322 20,673 (40,000) (5,198) 40,797 2011 82,023 25,311 (40,000) (6,497) 60,837 2012 104,491 28,836 (40,000) (8,122) 85,206 *The depreciation & amortization is estimated at 20% of gross fixed assets, with a 50% inclusion rate in the first year for new additions **Increases in working capital per year are based on turnover of receivables, inventory, and payables equal to 2007 levels 6. If Lululemon were to issue $50 million worth of new common stock, what should be the suggested price range for the IPO? Use free cash flow method (as you have done in the capital budgeting cases). Present some sensitivity analyses. Hint: Use the net cash flows given in Exhibit 4 to start the analysis. Remember to calculate cost of capital based on given information in the case. Use CAPM method for cost of equity calculation. Find out enterprise value, firm value, equity value and share price (as you learn in the 'valuation module"). Use comparable valuation methods (see the note below). How to choose the right competitors? (compare debt level)