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Cfroi Holt

1) The document presents a simplified discounted cash flow model to value a project over 20 years using metrics like growth rate, return on investment, capital expenditures, net cash flows, and valuation. 2) It calculates valuation amounts under two different approaches (Value #1 and Value #2) that both equal $354.3 initially and accounts for the net present value of future investments. 3) Key outputs include projected cash flows, assets, capital required, shareholder returns, and the percentage of future value from incremental investments.

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570 views7 pages

Cfroi Holt

1) The document presents a simplified discounted cash flow model to value a project over 20 years using metrics like growth rate, return on investment, capital expenditures, net cash flows, and valuation. 2) It calculates valuation amounts under two different approaches (Value #1 and Value #2) that both equal $354.3 initially and accounts for the net present value of future investments. 3) Key outputs include projected cash flows, assets, capital required, shareholder returns, and the percentage of future value from incremental investments.

Uploaded by

amro_bary
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
You are on page 1/ 7

SIMPLIFIED CFROI VALUATION MODEL AUDIT

-----START UP----- BIG "T" ---STOP INVESTING---


10% COST OF CAPITAL 1 2 3 4 5 6 7 8 9 10

(A) Growth Rate 10.0% 10.0% 10.0% 8.5% 7.5% 6.0%


(B) Project ROI 20.0% 20.0% 20.0% 20.0% 17.0% 15.0% 12.0%

Project Cash Flows

1 42.0 42.0 42.0


2 46.2 46.2 46.2
3 50.8 50.8 50.8
4 55.9 55.9 55.9
5 57.2 57.2 57.2
6 59.1 59.1 59.1
7 58.8 58.8 58.8

(C) Gross Cash Flow 0.0 42.0 88.2 138.9 152.8 163.9 172.1 175.0 117.8 58.8

(D) Investment NWC 20.0 22.0 24.2 26.6 28.9 31.0 32.9 0.0 0.0 0.0
(E) Released NWC 0.0 0.0 0.0 20.0 22.0 24.2 26.6 28.9 31.0 32.9

(F) Net Change NWC (D - E) 20.0 22.0 24.2 6.6 6.9 6.8 6.3 (28.9) (31.0) (32.9)

(G) CAPEX 80.0 88.0 96.8 106.5 115.5 124.2 131.6 0.0 0.0 0.0

(H) NCR (C - F - G) (100.0) (68.0) (32.8) 25.8 30.4 32.8 34.2 203.9 148.9 91.7

(I) Balance Sheet - NWC 20.0 42.0 66.2 72.8 79.7 86.6 92.8 64.0 32.9 0.0
(J) Balance Sheet - Gross Assets 100.0 210.0 331.0 364.1 398.5 432.8 464.2 319.8 164.6 0.0
(K) % Non-Depreciating 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%

(L) CFROI 20.0% 20.0% 20.0% 20.0% 18.9% 17.2% 14.6% 13.5% 12.0%
Gross CF(t) & Gross Assets(t-1)

VALUE #1 354.3 363.9 369.9 374.0 377.3 211.1 83.3 0.0


= PV NCR(t+1) to YR 10 [H]

EXISTING ASSETS

(M) PV This Year of Cash Flow / Wind Down 244.6 269.1 285.4 296.9 300.6 155.7 53.4 0.0
(N) PV Released NWC 54.5 60.0 65.7 71.4 76.6 55.4 29.9 0.0
(O) PV of Total Receipts From Existing Assets (M + N) 299.2 329.1 351.1 368.3 377.3 211.1 83.3 0.0

FUTURE INVESTMENTS

(P) Investment (D + G) 121.0 133.1 144.4 155.2 164.6 0.0 0.0 0.0

(Q) PV of Investment 144.5 158.9 163.9 170.2 170.9 0.0 0.0 0.0

(R) Incremental Wealth Created (P - Q) 23.5 25.8 19.5 14.9 6.3 0.0 0.0 0.0

(S) PV Incremental Wealth Stream 55.2 34.8 18.8 5.7 0.0 0.0 0.0 0.0

VALUE #2 354.3 363.9 369.9 374.0 377.3 211.1 83.3 0.0


= (O + S)

(T) Shareholder Return 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0%
((Value(t) + NCR(t) ) / Value(t-1)) - 1

(U) % Future 9.6% 5.1% 1.5% 0.0% 0.0% 0.0%


( S / Value(t) )
SIMPLIFIED CFROI VALUATION MODEL AUDIT

Project Life 3
Discount Rate 10.0%
Growth Rate 10.0%
Initial Investment 100
% Non-Depreciating 20.0%
Last yr. of Investment 7
Big "T", ROI = Discount Rate 8
End Year 20

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

(A) Growth Rate 10.0% 10.0% 10.0% 8.5% 7.5% 6.0%


(B) Project ROI 20.0% 20.0% 20.0% 20.0% 17.0% 15.0% 12.0%

Project Cash Flows

1 42 42 42
2 46 46 46
3 51 51 51
4 56 56 56
5 57 57 57
6 59 59 59
7 59 59 59
8 0 0 0
9 0 0 0
10 0 0 0
11 0 0 0
12 0 0 0
13 0 0 0
14 0 0 0
15 0 0 0
16 0 0 0

(C) Gross Cash Flow 0 42 88 139 153 164 172 175 118 59 0 0 0 0 0 0 0 0 0 0

(D) Investment NWC 20 22 24 27 29 31 33 0 0 0 0 0 0 0 0 0 0 0 0 0


(E) Released NWC 20 22 24 27 29 31 33 0 0 0 0 0 0 0 0 0 0

(F) Net Change NWC (D - E) 20 22 24 7 7 7 6 (29) (31) (33) 0 0 0 0 0 0 0 0 0 0

(G) CAPEX 80 88 97 106 116 124 132 0 0 0 0 0 0 0 0 0 0 0 0 0

(H) NCR (C - F - G) (100) (68) (33) 26 30 33 34 204 149 92 0 0 0 0 0 0 0 0 0 0

(I) Balance Sheet - NWC 20 42 66 73 80 87 93 64 33 - 0 0 0 0 0 0 0 0 0 0


(J) Balance Sheet - Gross Investment 100 210 331 364 399 433 464 320 165 0 0 0 0 0 0 0 0 0 0 0
(K) % Non-Depreciating 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0% 20.0%

(L) CFROI 20.0% 20.0% 20.0% 20.0% 18.9% 17.2% 14.6% 13.5% 12.0% Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523 Err:523
Gross CF(t) & Gross Inv(t-1)

VALUE #1 354 364 370 374 377 211 83 0 0 0 0 0 0 0 0 0 0 0


= PV NCR(t+1) to End [H]
EXISTING ASSETS:

Future Cash Flows From Existing Assets


Year T+1 88 139 153 164 172 175 118 59 0 0 0 0 0 0 0 0 0 0
Year T+2 88 97 107 113 116 118 59 0 0 0 0 0 0 0 0 0 0
Year T+3 46 51 56 57 59 59 0 0 0 0 0 0 0 0 0 0
Year T+4 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

/ (1+.1)^1 1.10 80 126 139 149 156 159 107 53 0 0 0 0 0 0 0 0 0 0 0


/ (1+.1)^2 1.21 73 80 88 93 96 97 49 0 0 0 0 0 0 0 0 0 0 0 0
/ (1+.1)^3 1.33 35 38 42 43 44 44 0 0 0 0 0 0 0 0 0 0 0 0 0
/ (1+.1)^4 1.46 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

(M) PV This Year of Cash Flows 245 269 285 297 301 156 53 0 0 0 0 0 0 0 0 0 0 0
(N) PV Released NWC 55 60 66 71 77 55 30 0 0 0 0 0 0 0 0 0 0 0
(O) PV of Total Receipts From Existing Assets (M + N) 299 329 351 368 377 211 83 0 0 0 0 0 0 0 0 0 0 0

(P) PV NCR(t+1) to Big "T" [H] 97 80 58 31


(Q) PV This Year Existing Asset at Big "T" [O] 258 283 312 343 377 211 83 0 0 0 0 0 0 0 0 0 0 0

VALUE #2 354 364 370 374 377 211 83 0 0 0 0 0 0 0 0 0 0 0


= (P + Q)

(R) Investment (D + G) 121 133 144 155 165 0 0 0 0 0 0 0 0 0

Annual Gross Cash Flow from Investment 51 56 57 59 59 0 0 0 0 0 0 0 0 0


Residual Value from Investment 24 27 29 31 33 0 0 0 0 0 0 0 0 0

PV of Investment GCF & Residual Value


/ (1+.1)^1 1.10 46 51 52 54 53 0 0 0 0 0 0 0 0 0
/ (1+.1)^2 1.21 42 46 47 49 49 0 0 0 0 0 0 0 0 0
/ (1+.1)^3 1.33 38 42 43 44 44 0 0 0 0 0 0 0 0 0
/ (1+.1)^4 1.46 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Residual Value / (1.1)^4 1.33 18 20 22 23 25 0 0 0 0 0 0 0 0 0
(S) PV of Investment 144 159 164 170 171 0 0 0 0 0 0 0 0 0

(T) Incremental Wealth Created (S - R) 23 26 20 15 6 0 0 0 0 0 0 0 0 0 0 0 0 0

(U) PV Incremental Wealth 55 35 19 6 0 0 0 0 0 0 0 0 0 0 0 0 0 0

VALUE #3 354 364 370 374 377 211 83 0 0 0 0 0 0 0 0 0 0 0


= (O + U)

(V) Shareholder Return ((Value(t) + NCR(t) ) / Value(t-1)) - 1 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

(W) % Future 9.6% 5.1% 1.5% 0.0% 0.0% 0.0%


( U / Value(t) )
CFROI

CFROI Gross Gross Cash Flows Non-Depr.


Investment 1 2 3 Asset CFROI

2 (100.00) 41.98 41.98 61.98 0.00 20.00 20.0%


3 (210.00) 88.15 88.15 130.15 0.00 42.00 20.0%
4 (331.00) 138.95 138.95 205.15 0.00 66.20 20.0%
5 (364.10) 152.84 152.84 225.66 0.00 72.82 20.0%
6 (398.51) 163.86 163.86 243.57 0.00 79.70 18.9%
7 (432.76) 172.12 172.12 258.67 0.00 86.55 17.2%
8 (464.22) 175.01 175.01 267.85 0.00 92.84 14.6%
9 (319.80) 117.81 117.81 181.77 0.00 63.96 13.5%
10 (164.56) 58.76 58.76 91.67 0.00 32.91 12.0%
11 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
12 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
13 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
14 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
15 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
16 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
17 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
18 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
19 0.00 0.00 0.00 0.00 0.00 0.00 Err:523
20 0.00 0.00 0.00 0.00 0.00 0.00 Err:523

PV NCR(t+1) to Big "T" [H] - CALCULATION P


Big T
Year 4 5 6 7 8 9 10 11
2
3 23 49 73 97 223 307 354 354
4 28 55 80 220 312 364 364
5 30 58 211 313 370 370
6 31 200 311 374 374
7 185 308 377 377
8 135 211 211
9 83 83
10 -
11
12
13
14
15
16
17
18
19
20

PV This Year Existing Asset at Big "T" - CALCULATION O

Page 4
CFROI

Year 4 5 6 7 8 9 10 11
2
3 299 290 277 258 131 47 0 0
4 329 319 304 283 144 52 0 0
5 362 351 335 312 159 57 0 0
6 398 386 368 343 174 63 0 0
7 438 425 405 377 192 69 0 0
8 482 467 446 415 211 76 0 0
9 530 514 490 456 232 83 0 0
10 583 565 539 502 255 92 0 0
11 641 622 593 552 281 101 0 0
12 705 684 652 608 309 111 0 0
13 776 753 718 668 340 122 0 0
14 854 828 790 735 374 134 0 0
15 939 911 868 809 411 148 0 0
16 1,033 1,002 955 890 452 162 0 0
17 1,136 1,102 1,051 979 498 179 0 0
18 1,250 1,212 1,156 1,076 548 197 0 0
19 1,375 1,333 1,272 1,184 602 216 0 0
20 1,512 1,467 1,399 1,302 662 238 0 0

Page 5
CFROI

Big T
12 13 14 15 16 17 18 19 20

354 354 354 354 354 354 354 354 354


364 364 364 364 364 364 364 364 364
370 370 370 370 370 370 370 370 370
374 374 374 374 374 374 374 374 374
377 377 377 377 377 377 377 377 377
211 211 211 211 211 211 211 211 211
83 83 83 83 83 83 83 83 83
- - - - - - - - -
- - - - - - - - -
- - - - - - - -
- - - - - - -
- - - - - -
- - - - -
- - - -
- - -
- -
-

Page 6
CFROI

12 13 14 15 16 17 18 19 20

0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0

Page 7

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