StartupCo commenced operations at the beginning of 2020. $125 million of equity was raised to fund the purchase of equipment as well as for general corporate purposes. As part of its business planning process, a 5-year forecast was developed (Base Case) as well as upside and downside scenarios (High and Low Cases, respectively). At the end of 2020, StartupCo issued $150 million of 5-year debt, repayable in equal annual installments at the end of each year, to finance its future capital program.

Model Inputs and Assumptions
General Assumptions
Forecast Scenario
Days Per Year				365
Capital Expenditure Assumptions
Asset Salvage Value (% of Capital Addition)				15%
Asset Useful Life				10 Years

Using the Base Case, calculate the ROE in 2022E Choose Answer:

• 4.5%
• 5.1%
• 5.5%
• 4.2%

Under the Base Case and using precedent trading metrics and 2021E amounts, what is the implied enterprise value if the median P/E ratio is used as the basis for valuation?

• $80,171
• 50,171
• 86,340
• 93,963

Using the Base Case, calculate net earnings for 2021E. Choose Answer:

• $7,725
• $6,600
• $7,163
• $5,250

2020 Income Statement Sales Revenue Cost of Sales Gross Profit $50,000 ($22,500) $27,500 SG&A Expense Depreciation Expense Interest Expense Income Before Income Taxes Income Taxes Net Income ($5,000) ($8,500) $0 $14,000 ($3,500) $10,500 Balance Sheet Assets Cash & Cash Equivalents Accounts Receivable Total Current Assets $194,000 $5,000 $199,000 Property, Plant & Equipment Total Assets $91,500 $290,500 Liabilities Accounts Payable Total Current Liabilities $5,000 $5,000 Long-Term Debt Total Liabilities $150,000 $155,000 Shareholders' Equity Share Capital Retained Earnings Total Shareholders' Equity Total Liabilities and Shareholders' Equity $125,000 $10,500 $135,500 $290,500 $10,500 Cash Flow Statement Operating Activities Net Income Adjustments For Depreciation Expense Changes in Non-Cash Working Capital Cash Generated From Operating Activities $8,500 $0 $19,000 Cash Generated From Operating Activities $19,000 Investing Activities Additions to Property, Plant & Equipment Cash (Used For) Investing Activities ($100,000) ($100,000) Financing Activities Issuance (Repayment) of Debt Issuance (Buy-back) of Equity Cash (Used For) Generated From Financing Activities $150,000 $125,000 $275,000 Cash (Used) Generated in the Period Cash & Cash Equivalents, Beginning of Period Cash & Cash Equivalents, End of Period $194,000 $0 $194,000 Base Case 2021E 2022E 2023E 2024E 2025E Income Statement Assumptions Annual Sales Growth (%) Cost of Sales (% of Sales) SG&A Expense (% of Sales) 6.0% 40.0% 6.0% 40.0% 10.0% 6.0% 40.0% 10.0% 6.0% 40.0% 10.0% 6.0% 40.0% 10.0% 10.0% 5.0% 5.0% 5.0% 5.0% Interest Rate Effective Tax Rate 5.0% 25.0% 25.0% 25.0% 25.0% 25.0% 30 30 30 30 30 Balance Sheet Assumptions Accounts Receivable (Days) Accounts Payable (Days) Capital Expenditures 25 25 25 25 25 $20,00 $20,00 0 0 $0 $0 $20,00 0 $0 $20,00 0 $0 $20,00 0 $0 Equity Issued (Repaid)