Using the spreadsheet template provided, calculate the value of Generic Research under the growth strategy

Assumptions:

• In addition to the growth rate, they will spend an extra $5M on advertising in 2013, 2014 and 2015.
• The planning period growth rate is 8%, the terminal growth rate is 3%, and WACC is 8.8%.
• The interest rate on new debt is 6.5%.
• Revenuesandexpensesgrowatthesamerate.

This contains the pro forma balance sheet, which has already been completed for you, and the post-acquisition 2009 numbers for the income statement. The groundwork has been laid, and you can start putting in your growth rates, calculating the pro forma income statement and the free cash flows. You can use a planning period of five years and use the sixth year for the terminal value calculation. Calculate terminal value using the growing perpetuity method.

Balance Sheet Current assets Gross property, plant & equipment Less: accumulated depreciation Net Property Plant & Equipment Goodwill Total Assets Current Liabilities Long-term Debt Total Liabilities Common stock (par) Paid-in capital Retained earnings Common equity Total Liabilities & Equity Income Statement Revenues Cost of Goods Sold Gross Profit SG&A Expenses Depreciation Expense Net Operating income Interest Expense Earnings before Taxes Taxes Net Income Post-Acquisition 2009 41,865,867 88,164,876 (41,024,785) 47,140,091 20,819,868 109,825,826 9,825,826 40,000,000 49,825,826 400,000 59,600,000 60,000,000 109,825,826 Post-Acquisition 2009 80,000,000 (45,733,270) 34,266,730 (17,600,000) (6,500,000) 10,166,730 (2,523,020) 7,643,710 1,910,928 5,732,783 2010 45,215,136 95,218,066 (48,044,785) 47,173,281 ### 113,208,285 2011 48,832,347 102,835,511 (55,626,385) 47,209,126 20,819,868 116,861,342 2012 52,738,935 111,062,352 (63,814,513) 47,247,839 20,819,868 120,806,642 2013 56,958,050 119,947,340 (72,657,691) 47,289,649 20,819,868 125,067,567 2014 61,514,694 129,543,128 (82,208,324) 47,334,804 20,819,868 129,669,366 2015 66,435,869 139,906,578 (92,523,007) 47,383,571 20,819,868 134,639,308 10,611,892 40,000,000 50,611,892 400,000 59,600,000 2,596,393 62,596,393 113,208,285 11,460,843 40,000,000 51,460,843 400,000 59,600,000 5,400,498 65,400,498 116,861,342 12,377,711 40,000,000 52,377,711 400,000 59,600,000 8,428,931 68,428,931 120,806,642 13,367,928 40,000,000 53,367,928 400,000 59,600,000 11,699,639 71,699,639 125,067,567 14,437,362 40,000,000 54,437,362 400,000 59,600,000 15,232,004 75,232,004 129,669,366 15,592,351 40,000,000 55,592,351 400,000 59,600,000 19,046,957 79,046,957 134,639,308 2010 2011 2012 2013 2014 2015