Description
Instructions are attached.
Unformatted Attachment Preview
The Duke’s Sporting Goods Store
Valuation Analysis as of December 31 of the Current Year
Discounted Cash Flow Analysis
$’s In Thousands
FYE
CY-3
Revenue
Cost of Goods Sold
Gross Profit
SG&A
R&D
EBITDA
Depreciation & Amortization
EBIT
Interest Expense
EBT
Effective Tax Rate
Income Tax Expense
Net Income
$1,000
500
500
300
25
175
25
150
0
150
40.0%
60
$90
FYE
CY-2
$1,200
600
600
350
30
220
25
195
0
195
40.0%
78
$117
FYE
CY-1
$1,400
700
700
400
35
265
25
240
0
240
40.0%
96
$144
Net Cash Flow
Discount Period in Years
(a) Discount Factor
(b) Discount Rate
(c) Growth Rate
(d) Perpetual Growth Rate
(e) Terminal Value
16.0%
5.0%
3.5%
(f) Present Value – Cash Flow/Terminal Value
Net Present Value
Notes:
(a) Reflects end-of-year discounting convention.
(b) Based upon the Weighted Average Cost of Capital as reported in Ibbotson’s Cost of Capital Yearbook (data through June
(c) Based upon estimated long term cash flow growth rate of the economy in general (as assumed in the Case Study).
(d) Terminal Value = (Terminal Year Cash Flow / (Discount Rate – Perpetual Growth Rate))
(e) Present value to end of current year.
Sources: Fiscal Year Ending (FYE) CY from audited financial statements and business forecasts.
Fiscal Year Ending
Current Year
FYE
CY+1
Projected (a)
FYE
CY+2
FYE
CY+3
Terminal
Year
$1,500
750
750
425
40
285
25
260
0
260
40.0%
104
$156
of Capital Yearbook (data through June 2006) for SIC 3949 adjusted for other risks.
Forecast the
Income for CY+1, CY+2, CY+
Hint:
Revenue and Expenses grow
Calculate the Net Cash Flow fr
Hint:
– Add back Depreciation/Amo
– Subtract CAPEX
– Subtract the change in NWC
calculated using Facts #1 and
Calculate Net Present Value.
Forecast the Income Statement here to get to Net
Income for CY+1, CY+2, CY+3, and Terminal Year.
Revenue and Expenses grows at the same rate
alculate the Net Cash Flow from Net Income.
Add back Depreciation/Amortization
Subtract CAPEX
Subtract the change in NWC (This should be
alculated using Facts #1 and #2)
alculate Net Present Value.
Purchase answer to see full
attachment
