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Kohler DCF

This document contains calculations related to valuing a company using a discounted cash flow approach. It includes calculations of net operating profit after tax, free cash flow, terminal value, weighted average cost of capital, total valuation, and adjustments for lack of control and liquidity. Specifically: 1. It calculates free cash flow for the years 1998-2002 by taking net operating profit after tax plus depreciation and subtracting capital expenditures and changes in working capital. 2. It discounts these cash flows using the weighted average cost of capital to calculate their present value. 3. It calculates a terminal value based on the company's expected perpetual growth and reinvestment rates. 4. It sums the present value

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Jennifer Langton
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7K views1 page

Kohler DCF

This document contains calculations related to valuing a company using a discounted cash flow approach. It includes calculations of net operating profit after tax, free cash flow, terminal value, weighted average cost of capital, total valuation, and adjustments for lack of control and liquidity. Specifically: 1. It calculates free cash flow for the years 1998-2002 by taking net operating profit after tax plus depreciation and subtracting capital expenditures and changes in working capital. 2. It discounts these cash flows using the weighted average cost of capital to calculate their present value. 3. It calculates a terminal value based on the company's expected perpetual growth and reinvestment rates. 4. It sums the present value

Uploaded by

Jennifer Langton
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Annex I: Discounted Cash Flow and WACC calculation

DCF Valuation Approach


1 Operating Income after Depreciation
2
Less: Tax
3 NOPAT

1998a
102,688
(45,451)
57,237

Tax Rate
1999
126,032
(54,724)
71,308

2000
171,619
(74,518)
97,101

2001
187,978
(81,621)
106,357

2002
201,604
(87,537)
114,067

4 Depreciation and Amortization


5 Purchase of Property, Plant and Equipment
6 Net Change in Working Capital

56,113
(87,691)
(1,435)

87,661
(97,205)
(5,762)

91,786
(96,971)
(27,705)

94,593
(96,811)
(17,702)

97,355
(106,647)
(23,145)

7 Free Cash Flow (Firm)


8 PV of Free Cash Flow
9 Terminal Value

24,224
23,449
809,161

56,002
48,491

64,211
50,510

86,437
61,770

81,630
52,995

10
11
12
13
14

15
16
17
18

Total Valuation (DCF)


Total Debt
Equity Valuation
Total Shares
Per Share Value (Thousands)

1,046,376
232,444
813,932
7,587.89
107.27

DCF Valuation Approach - Includes Liquidity & Minority Discount


1998a
Liquidity Discount
22.50%
Per Share Value (Thousands)
83.13
Minority Discount
39.50%
Per Share Value (Thousands) - Adjusted
50.29

Exhibit 6b - Calculation
1998a
1999
44.26%
43.42%

Growing Perpetuity - Continuing Value


TV Assumption
90,922
Reinvestment Rate
3.00%
Rate (WACC)
10.08%
Growth Rate
3.00%
Continuing Value *
$ 1,246,385

2000
43.42%

2001
43.42%

2002
43.42%

WACC Calculation
T:
43.4%
Rd:
6.60%
MRP:
5.00%
rf:
5.64%
B:
1.03
Re:
10.78%

Assumption
Assumption
Calculation
Assumption

* CVH = E(NOPATH+1) * (1 - b) / r - g

E/V:
D/V:

90.00%
10.00%

WACC **

10.08%

given
given
given
Exhibit 8
Calculated
Calculated

** WACC = (E/V) x Re + (D/V) x (Rd x (1 - T))

1999

2000

2001

2002

COMPS - BA => BE Calculation


American
Standard
Total Debt
2,404.0
MV of Equity
3,502.2
Debt + Equity
5,906.2
DV
EV

American
Woodmark
13.4
236.3
249.7

40.70%
59.30%

Masco
1,187.9
9,838.8
11,026.7
10.77%
89.23%

Briggs &
Stratton
259.6
1,109.3
1,368.9
18.96%
81.04%

Cummins
Engine
1,250.0
2,285.9
3,535.9
35.35%
64.65%

Detroit
Diesel
107.4
568.1
675.5
15.90%
84.10%

Average
870.4
2,923.4

24.34%
75.66%

NOTES:
1

Exhibit 6b

Operating Income after Depreciation x (1-T)

Operating Income after Depreciation - Tax

Exhibit 6c

Exhibit 6c: Purchase/Sale of PP&E (Net Capex)

Exhibit 6c: SUM of Increase/Decrease: AR, Inventory, Future Income Tax Benefits, Prepaid Expenses and other Assets, AP& Accrued Expenses

NOPAT + Operating Income after Depreciation - Net Capex - Net Change in Working Capital

1998: FCF / ((1 + WACC x 8/12)^0.5) 1999: FCF / ((1 + WACC)^1.5) 2000: FCF / ((1 + WACC)^2.5) 2001: FCF / ((1 + WACC)^3.5) 2002: FCF / ((1 + WACC)^4.5)

Continuing Value / ((1 + WACC)^4.5)

10

Continuing Value + SUM PV of FCF

11

Exhibit 3a: 1998 Current Maturities LTD + LTD

12

Total Valuation (DCF) - Total Debt

13

Exhibit 5: Total Shares Outstanding

14

Equity Valuation / Total Shares

15

Note on Valuring Control and Liquidity in Family and Closely Held Firms: Range 20-25% (Value Stated is an Average)

16

Unadjusted Per Share Value x (1 - Liquidity Discount)

17

Note on Valuring Control and Liquidity in Family and Closely Held Firms: Range 36-49% (Value Stated is an Average)

18

Liquidity Discount Per Share Value x (1 - Minority Discount)

B over last 36 months


Unlevered B (Asset)
Relevered BE

0.82
0.49
1.03

0.76
0.72

1.28
1.14

0.66
0.53

1.09
0.70

1.30
1.09

0.79

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