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Dysinger Enterprises Computer Project!
Dysinger Inc. is an up and coming server-based customer relationship management technology
firm that started was created via merger with Teragon Capital- an arrangement initiated by 4th
Point Capital which is a private equity fund specializing in this field. The firm is known for its
abilities in artificial intelligence (AI)/augmented reality (AR) and is in Fall River, Massachusetts.
Due to the company’s belief in focus and specialization and being a recognized industry leader,
the company primarily develops, produces, markets, and services a single market leading product
(Ziromax).
Dysinger hired a technology consulting firm (Trend Analysis Ventures, Inc.) to estimate unit
sales for the next five years for which market research points to the following results: 567,439,
518,663, 498,782, 427,565, and 317,988 units respectively. These results are contingent on the
company keeping its average selling price per unit of $297 for the next two years and $229 in the
following three years. Thereafter, growth in unit sales are expected to be 3.29% indefinitely.
The Executive Committee of the board authorized and performed an internal audit for which it
was determined that the company can produce Ziromax at a variable cost per unit of $118.35
growing at 2.57% per year for the first 5 years and 2.95% per year indefinitely thereafter while
overall fixed costs are estimated to be $21,457,700 annually for the first year and grow 3.09%
per year indefinitely.
Based on the market research and the internal audit, it is believed the company needs to increase
expand capacity to meet projected unit sales. As such, necessary initial capital expenditures are
projected to be $36,832,800 and due to the nature of the investments that the company makes, an
IRS ruling deems depreciation to be based on the seven-year MACRS schedule. In the terminal
phase of growth, an additional investment strategy is expected to change in favor of maintaining
the current AI/AR service opportunities that are projected to become annuitized going forward.
Associated with this, an anticipated average annual depreciation charge of $713,500 is expected
and which will follow straight-line depreciation method with a 3-year time horizon strategy.
To support sales, the company’s investment in working capital is projected to be 14.34% of
yearly sales for the first 5 years. The terminal phase is expected to elicit slower growth for which
the resulting investment in working capital is projected to slow to a 3.87% annual growth rate
thereafter.
The marginal corporate income tax rate is expected to average 21.15% assuming no changes to
the marginal corporate income tax rate and the projected annual growth rate of Free Cash Flow
(FCF) in the terminal phase is expected to be approximately 3.57% indefinitely. Looking at past
numbers on an average basis, the debt-equity ratio has consistently centered around 114% for
which Dysinger’s current debt level is $31,625,750 with an average maturity of 6 years and an
interest rate on this debt averaging 6.835%. After further analysis, the Treasurer is comfortable
using an equity beta of 1.6325 while the risk-free rate of return is given as 2.945% and the
market rate of return is 10.56%. Currently there are 1,946,540 shares of common stock
outstanding.
You have been hired by Dysinger Inc. to determine the following:
1) Operating Cash Flow: First 5 years and Terminal Phase
2) Free Cash Flow: First 5 years and Terminal Phase
3) Asset Beta (Industry Beta)
4) Discount Rate
5) Asset Value
6) Equity Value
7) Stock Price
8) Recommendations to enhance Dysinger’s stock price
Your presentation must be in the form of a single professionally prepared Excel spreadsheetmultiple documents are not allowed! Focus on eye appeal that will create a flowing development
throughout so clean it up and label all references. You must NOT have constant number inputs
which would destroy cell referencing for future use. Be careful, you will be penalized for any
and all cell referencing that is destroyed. Additionally, you are to have separate worksheet tabs
for Data Entry, Operating Cash Flow, Free Cash Flow, Asset Beta, Discount Rate, Asset Value,
Equity Value, Stock Price, and Recommendations. Do not submit your computer project early as
I may come back with additional requirements! Should there be additional requirements-you will
need a separate worksheet tab for each and every additional requirement that is assigned! When
you are done, properly title and submit your work through Moodle by the deadline which is the
start of class on the date shown in the syllabus. If you have any questions, feel free to contact me
and good luck with your presentation!
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