Value Ferrari using a DCF model. Break down estimates into three tabs: assumptions, estimates for PPE, WCAP and depreciation and valuation itself. Use discount rate mentioned in the case. Make assumption about terminal growth rate. In your valuation model, the first year is 2015 (T=1). You will impose closure on your valuation in T=6 (year 2020).

grow For PPE/WCAP/depreciation worksheet, use forecasted balance sheet data from the tables and estimate changes on annual basis. Note that net PPE = gross PPE - depreciation. Make corresponding adjustments. For terminal value estimate, assume that PPE and WCAP at a terminal growth rate. Your Excel worksheet will end up having the following entries: WCAP change Net PPE changet PPE change- EBIT Interest Pre-tax profite Taxe Net income Depreciation Change in P&PE Change in NWC Free Cash Flow Terminal value Discount factors Present value Enterprise value Debte Cash Implied value of equity Shares outstanding Implied share price, EUR Implied Share Price in USD Implied EBITDA/EV multiple You need to estimate cost of debt. You can assume that Ferrari has a AAA credit rating. Exhibit 1 Ferrari: The 2015 Initial Public Offering Ferrari Car Shipments Full Year 2013 First Half of Year 2014 2015 2012 2014 By Model Type Sports Cars V8 V12 Total 1,581 4,274 481 4755 3,944 1401 5,345 3,651 1.565 5,216 2,077 900 2,977 2,226 1,219 GT Cars V8 V12 Total 1,589 1061 2,650 1,645 394 454 237 691 1,280 188 1,468 1,655 2,039 686 456 753 214 By Geography Europe, Middle East, and Africa United Kingdom Germany Switzerland Italy France Middle East Rest of EMEA Total EMEA Americas Americas 366 318 330 423 686 659 350 206 273 472 663 3,309 705 616 332 243 253 521 408 353 181 132 138 232 349 1,793 155 139 129 185 320 1,598 3,703 3,274 2,208 2,382 2,462 1,199 1,287 Asia Pacific Greater China Rest of APAC Total APAC 789 705 1,494 572 737 1,309 675 844 1,519 289 387 676 261 548 809 Total 7,405 7,000 7255 3,668 3,694 Middle East includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman, and Kuwait. Rest of Europe, Middle East and Africa (EMEA) includes Africa and the other European markets not separately identified Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America Greater China includes China, Hong Kong, and Taiwan Rest of Asia Pacific (APAC) mainly includes Japan, Australia, Singapore, Indonesia, and South Korea. Exhibit 3 Ferrari: The 2015 Initial Public Offering Ferrari Income Statement (millions of enco) First Half 2015 2012 2013 2014 Sales Cars and Spare Parts (1) Engines (2) Sponsorship, Commercial and Brand (3) Other (4) Total Sales 1,695 77 385 69 2,225 1,655 188 412 80 2,335 1,944 311 417 91 2,762 1,007 121 212 45 1,387 Cost of Sales excluding Dep and Amort Depreciation & Amortization Expense Selling General, and Admin Expense Research & Development Other Operating Expense Operating Income (EBIT) 961 238 243 431 17 335 964 270 260 479 1,217 289 300 541 26 389 592 130 152 291 4 218 364 Net Financial Income (Expense) Profit before Tax Income Tax Expense Net Profit -1 335 101 233 3 366 120 246 2 398 133 265 -27 191 65 126 Capital Expenditures 258 271 330 151 (1) Inchides the net revenues generated from shipments of our cars, including any personalization revenue generated on these cars and sales of spare parts. (2) Includes the net revenues generated from the sale of engines to Maserati for use in their cars, and the revenues generated from the rental of engines to other Formula 1 racing teams (3) Includes the net revenues earned by our Fomula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues and net revenues generated through the Ferrari brand, including merchandising licensing and royalty income. (4) Primarily includes interest income generated by the Ferrari Financial Services group and net revenues from the management of the Mugello racetrack Exhibit 4 Ferrari: The 2015 Initial Public Offering Ferrari Balance Sheet (millions of enco) 31-Dec-2013 798 206 863 238 31-Dec-2014 1,077 184 1,224 296 64 2,845 30-Jun-2015 258 154 1,181 352 115 Cash and cash equivalents Trade receivables Receivables from financing activities Inventories Other current assets Total current assets Investments and other financial assets Deferred tax assets Property, plant, and equipment Intangible Assets (1) Goodwill Total assets 2.219 37 42 568 242 787 112 585 265 787 100 2,045 48 149 589 283 787 3,895 4,641 3,900 578 182 Trade payables Current tax payables Other current liabilities Total current liabilities Long-term debt Other liabilities Total equity Total liabilities and equity 486 104 475. 1,065 317 197 2.316 3,895 536 110 774 1,420 510 233 2.478 4,641 1,595 2,267 239 -201 3,900 (1) Costs incurred for car project development are recognized as asset following the conditions of LAS38. Capitalized development costs are amortized on a straight-line basis over the estimated life of the model generally four to eight years). Exhibit 8 Ferrari: The 2015 Initial Public Offering Ferrari Forecast (millions of euro, except as noted) 2014 3.6% 2016 Assumptions Growth in Cars Shipped Growth in Retemie Car Growth in Engine Reveme Growth in Other Reveme 2015 7.0% 5.0% 3.0% 3.0% 5.0% 5.0% 3.0% 6.0% 2017 4.0% 5.0% 3.0% 6.0% 2018 4.0% 5.0% 3.0% 6.0% 2019 3.0% 5.0% 3.0% 6.0% Operating Margin-Cars Operating Margit: Engines Operating Margi)A1 Other Reveme 12.5% 13.0% 13.5% 14.0% 9.1% 10.0% 10.0% 10.0% 24.9% 25.0% 27.0% 28.0% 14.0% 14.0% 10.0% 10.0% 30.0% 30.0% Net Working Capital Turnover Net Fixed Asset Tumorer Deprec & Amort/PPE 1.9 3.2 34% 2.0 3.2 34% 2.1 3.3 34% 2.2 3.5 34% 2.2 3.7 34% 2.2 3.8 34% Financial Forecast Car Shipments (000s) Avg Rereme per Car (Euro 000s) Car Reveme Engine Reverie Al other Reveme Total Reveme 7.26 268 1,944 311 507 2,762 7.76 281 2,184 320 523 3,027 8.15 295 2,408 330 554 3,292 8.48 310 2,629 340 587 3,556 8.82 326 2,871 350 623 3,844 9.08 342 3,105 361 660 4,126 Operating Profit-Cars Operating Profit-Engines Operating Profit-All Other Reveme Total Operating Profit 243 28 126 398 284 32 131 447 325 33 150 368 34 164 567 402 35 187 624 435 36 198 669 508 Net Working Capital Net PP&E and Int. Assets Dep & Amort 1,425 851 289 1,513 932 317 1,568 998 339 1,617 1,016 345 1,747 1,039 353 1,875 1,086 369 Exhibit 9 Ferrari: The 2015 Initial Public Offering Capital Markets Data (October 19, 2015) Goverment Bond Yields (Italy) 1 year 10 year 0.23% 1.70% Corporate Bonds Euro 1.91% 1.99% 2.30% AAA AA A BBB BB B 3.43% 4.98% 6.79% Exchange Rate USD/EUR 1.1375 Source: Created by author based on data from ADB Analisi Data Borsi, Merrill Lynch, and author estimates grow For PPE/WCAP/depreciation worksheet, use forecasted balance sheet data from the tables and estimate changes on annual basis. Note that net PPE = gross PPE - depreciation. Make corresponding adjustments. For terminal value estimate, assume that PPE and WCAP at a terminal growth rate. Your Excel worksheet will end up having the following entries: WCAP change Net PPE changet PPE change- EBIT Interest Pre-tax profite Taxe Net income Depreciation Change in P&PE Change in NWC Free Cash Flow Terminal value Discount factors Present value Enterprise value Debte Cash Implied value of equity Shares outstanding Implied share price, EUR Implied Share Price in USD Implied EBITDA/EV multiple You need to estimate cost of debt. You can assume that Ferrari has a AAA credit rating. Exhibit 1 Ferrari: The 2015 Initial Public Offering Ferrari Car Shipments Full Year 2013 First Half of Year 2014 2015 2012 2014 By Model Type Sports Cars V8 V12 Total 1,581 4,274 481 4755 3,944 1401 5,345 3,651 1.565 5,216 2,077 900 2,977 2,226 1,219 GT Cars V8 V12 Total 1,589 1061 2,650 1,645 394 454 237 691 1,280 188 1,468 1,655 2,039 686 456 753 214 By Geography Europe, Middle East, and Africa United Kingdom Germany Switzerland Italy France Middle East Rest of EMEA Total EMEA Americas Americas 366 318 330 423 686 659 350 206 273 472 663 3,309 705 616 332 243 253 521 408 353 181 132 138 232 349 1,793 155 139 129 185 320 1,598 3,703 3,274 2,208 2,382 2,462 1,199 1,287 Asia Pacific Greater China Rest of APAC Total APAC 789 705 1,494 572 737 1,309 675 844 1,519 289 387 676 261 548 809 Total 7,405 7,000 7255 3,668 3,694 Middle East includes the United Arab Emirates, Saudi Arabia, Bahrain, Lebanon, Qatar, Oman, and Kuwait. Rest of Europe, Middle East and Africa (EMEA) includes Africa and the other European markets not separately identified Americas includes the United States of America, Canada, Mexico, the Caribbean and Central and South America Greater China includes China, Hong Kong, and Taiwan Rest of Asia Pacific (APAC) mainly includes Japan, Australia, Singapore, Indonesia, and South Korea. Exhibit 3 Ferrari: The 2015 Initial Public Offering Ferrari Income Statement (millions of enco) First Half 2015 2012 2013 2014 Sales Cars and Spare Parts (1) Engines (2) Sponsorship, Commercial and Brand (3) Other (4) Total Sales 1,695 77 385 69 2,225 1,655 188 412 80 2,335 1,944 311 417 91 2,762 1,007 121 212 45 1,387 Cost of Sales excluding Dep and Amort Depreciation & Amortization Expense Selling General, and Admin Expense Research & Development Other Operating Expense Operating Income (EBIT) 961 238 243 431 17 335 964 270 260 479 1,217 289 300 541 26 389 592 130 152 291 4 218 364 Net Financial Income (Expense) Profit before Tax Income Tax Expense Net Profit -1 335 101 233 3 366 120 246 2 398 133 265 -27 191 65 126 Capital Expenditures 258 271 330 151 (1) Inchides the net revenues generated from shipments of our cars, including any personalization revenue generated on these cars and sales of spare parts. (2) Includes the net revenues generated from the sale of engines to Maserati for use in their cars, and the revenues generated from the rental of engines to other Formula 1 racing teams (3) Includes the net revenues earned by our Fomula 1 racing team through sponsorship agreements and our share of the Formula 1 World Championship commercial revenues and net revenues generated through the Ferrari brand, including merchandising licensing and royalty income. (4) Primarily includes interest income generated by the Ferrari Financial Services group and net revenues from the management of the Mugello racetrack Exhibit 4 Ferrari: The 2015 Initial Public Offering Ferrari Balance Sheet (millions of enco) 31-Dec-2013 798 206 863 238 31-Dec-2014 1,077 184 1,224 296 64 2,845 30-Jun-2015 258 154 1,181 352 115 Cash and cash equivalents Trade receivables Receivables from financing activities Inventories Other current assets Total current assets Investments and other financial assets Deferred tax assets Property, plant, and equipment Intangible Assets (1) Goodwill Total assets 2.219 37 42 568 242 787 112 585 265 787 100 2,045 48 149 589 283 787 3,895 4,641 3,900 578 182 Trade payables Current tax payables Other current liabilities Total current liabilities Long-term debt Other liabilities Total equity Total liabilities and equity 486 104 475. 1,065 317 197 2.316 3,895 536 110 774 1,420 510 233 2.478 4,641 1,595 2,267 239 -201 3,900 (1) Costs incurred for car project development are recognized as asset following the conditions of LAS38. Capitalized development costs are amortized on a straight-line basis over the estimated life of the model generally four to eight years). Exhibit 8 Ferrari: The 2015 Initial Public Offering Ferrari Forecast (millions of euro, except as noted) 2014 3.6% 2016 Assumptions Growth in Cars Shipped Growth in Retemie Car Growth in Engine Reveme Growth in Other Reveme 2015 7.0% 5.0% 3.0% 3.0% 5.0% 5.0% 3.0% 6.0% 2017 4.0% 5.0% 3.0% 6.0% 2018 4.0% 5.0% 3.0% 6.0% 2019 3.0% 5.0% 3.0% 6.0% Operating Margin-Cars Operating Margit: Engines Operating Margi)A1 Other Reveme 12.5% 13.0% 13.5% 14.0% 9.1% 10.0% 10.0% 10.0% 24.9% 25.0% 27.0% 28.0% 14.0% 14.0% 10.0% 10.0% 30.0% 30.0% Net Working Capital Turnover Net Fixed Asset Tumorer Deprec & Amort/PPE 1.9 3.2 34% 2.0 3.2 34% 2.1 3.3 34% 2.2 3.5 34% 2.2 3.7 34% 2.2 3.8 34% Financial Forecast Car Shipments (000s) Avg Rereme per Car (Euro 000s) Car Reveme Engine Reverie Al other Reveme Total Reveme 7.26 268 1,944 311 507 2,762 7.76 281 2,184 320 523 3,027 8.15 295 2,408 330 554 3,292 8.48 310 2,629 340 587 3,556 8.82 326 2,871 350 623 3,844 9.08 342 3,105 361 660 4,126 Operating Profit-Cars Operating Profit-Engines Operating Profit-All Other Reveme Total Operating Profit 243 28 126 398 284 32 131 447 325 33 150 368 34 164 567 402 35 187 624 435 36 198 669 508 Net Working Capital Net PP&E and Int. Assets Dep & Amort 1,425 851 289 1,513 932 317 1,568 998 339 1,617 1,016 345 1,747 1,039 353 1,875 1,086 369 Exhibit 9 Ferrari: The 2015 Initial Public Offering Capital Markets Data (October 19, 2015) Goverment Bond Yields (Italy) 1 year 10 year 0.23% 1.70% Corporate Bonds Euro 1.91% 1.99% 2.30% AAA AA A BBB BB B 3.43% 4.98% 6.79% Exchange Rate USD/EUR 1.1375 Source: Created by author based on data from ADB Analisi Data Borsi, Merrill Lynch, and author estimates