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Financial Modelling Complete Internal Test 4

The document provides information to build a financial model for a company with $50 million in initial sales growing at 25% annually. It secures a joint venture in year 3 that scales up over time. Key aspects include calculating EBITDA, capex, debt, cash flows, and valuing the company using DCF and relative valuation methods. The model shows projections for income statement, balance sheet, capex funding and cash flows out to year 15 to value the company today at a 1 year forward PE of 10.

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vaibhav
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277 views6 pages

Financial Modelling Complete Internal Test 4

The document provides information to build a financial model for a company with $50 million in initial sales growing at 25% annually. It secures a joint venture in year 3 that scales up over time. Key aspects include calculating EBITDA, capex, debt, cash flows, and valuing the company using DCF and relative valuation methods. The model shows projections for income statement, balance sheet, capex funding and cash flows out to year 15 to value the company today at a 1 year forward PE of 10.

Uploaded by

vaibhav
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Build A Financial Model

An company has sales of $50 million growing at 25% YoY with EBITDA margins at 20%. It secures a JV in Year 3 w
(linear scaling implies Revenue Yr-3=20, Yr-4=30). Capex required for normal growth of the firm is 7.5% of sales a
JV sales). The model should use debt, retained earnings to grow the firm. The current debt ratio of the firm is 2:
Capex should be done at current debt equity ratio. For current year inventory = 6mn, receivables = 8 mn, payabl
company is 30%, Depreciation rate is 10%, Interest Expense Rate is 10% (depreciation and interest to be calculat
period cash). Value the firm using both methods DCF and Relative. For DCF Valuation assume weights of equity a
Beta of comparable company is 0.5. Company goes in maturity stage from year 7 onwards with growth at 5% for
15 ? What is the value of the firm today at 1 year forward PE 10 ?

Formulae for Working Capital Line Items:


DOH Average Inventory / (COGS/365)
DSO Average Accounts Receivables / (Sales/365)
Pay Days Average Trade Payables / (COGS/365)
secures a JV in Year 3 with additional business of $20 million at EBITDA of 12.5% which linearly scales up to $50 million in Y
he firm is 7.5% of sales and Capex required for expansion at time of JV is $4 million (after JV year capex for JV revenue will b
bt ratio of the firm is 2:1 with average cash conversion cycle of 90 days and payment terms with debtor and creditors at 60
eivables = 8 mn, payables = 5 mn and retained earning = 9mn, Fixed Asset, Net & Gross = 15mn and Cash = 3mn. Tax rate fo
d interest to be calculated on average of current and previous year) and Interest Income Rate is 5%(interst income on begin
ume weights of equity and debt based on current book value. Risk free return in the economy is 7%, market risk premium is
s with growth at 5% forever. For relative valuation use P/E as valuation metric. What would be the value of the firm in year
Year-0 Year-1 Year-2 Year-3 Year-4 Year-5 Year-6

Income Statement

Sales 50 63 78 98 122 153 190.73


y/y % growth 25% 25% 25% 25% 25% 0.25
Sales - JV 0 0 20 30 40 50.00
Total Sales 50 63 78 118 152 193 240.73

COGS 50 63 96 124 157 196.34

EBITDA 20% 13 16 20 24 31 38.15


EBITDA-JV 12.50% - - 3 4 5 6.25
EBITDA-Total 13 16 22 28 36 44.40
Depreciation 10.0% 2 2 3 4 6 7.17
EBIT 11 13 19 24 30 37.22
Interest Expense 10.0% 1.956 2.308 2.881 3.638 4.500 5.58
Interest Income 5.0% 0.150 (0.066) 0.513 (0.042) 0.991 0.71
EBT 8.959 10.989 16.542 20.227 26.459 32.35

Tax 30.0% 2.69 3.30 4.96 6.07 7.94 9.71


PAT 6.27 7.69 11.58 14.16 18.52 22.65

Cape Schedule
Capex 5 6 7 9 11 14
Capex as % Sales 7.5% 7.5% 7.5% 7.5% 7.5% 7.5%
Capex - JV 4 2 3 4
Capex as % Sales JV 7.5% 7.5% 7.5%
Total Capex 5 6 11 11 14 18

Capex Funding
Debt 67% 3 4 8 8 10 12
Equity - Retained Earning 33% 2 2 4 4 5 6

Balance Sheet

Cash 3 (1) 10 (1) 20 14 41


Inventory 6 19 12 35 26 51 45
Account Receivable 8 13 13 26 24 39 40
PPE, Gross 15 20 26 37 48 63 81
Acc Dep 2 4 7 11 17 24
PPE, Net 15 18 22 30 37 46 57
Total Assets 32 48 57 89 107 150 183
Accounts Payable 5 11 9 22 18 33 31
Debt 18 21 25 33 40 50 62
Retained Earnings 9 15 23 35 49 67 90
Total Liabilities and Sh Equity 32 48 57 89 107 150 183
Checksum - - - - - - -

D/E
DOH 90 90 90 90 90 90 90
DSO 60 60 60 60 60 60 60
Pay Days 60 60 60 60 60 60 60

Cash Flow Statement

PAT 6 8 12 14 19 23
Dep 2 2 3 4 6 7
Change in Inv (13) 6 (23) 9 (25) 6
Change in AR (5) (1) (12) 1 (14) (1)
Change in AP 6 (2) 13 (4) 15 (2)
CFO 0 -3 14 -7 24 -1 32

Capex (5) (6) (11) (11) (14) (18)


CFI 0 -5 -6 -11 -11 -14 -18

Change in Debt 3 4 8 8 10 12
CFF 0 3 4 8 8 10 12

Net Change in Cash 0 -4 12 -11 21 -6 26

BOP Cash 3 (1) 10 (1) 20 14


EOP Cash 3 (1) 10 (1) 20 14 40.60

DCF Valuation

We 33.3%
Wd 66.7%
Ke 10.5%
Kd 10.0%
WACC 8.2%

NOPAT = EBIT*(1-T) 8 9 13 17 21 26
Depreication 2 2 3 4 6 7
Capex 5 6 11 11 14 18
Change in Working Capital (11) 4 (22) 6 (25) 3
FCFF 15 2 27 4 37 13
TerminalValue 419
Total Cash Flows 15 2 27 4 37 432

Enterprise Value 334


Less: Debt 62
Add: Cash 41
Intrinsic Equity Value 313

Relative Valuation

PAT - Year1 6 PAT - Year6 23


PE 10x PE 15x
Value 63 Value 340

CAGR % 24%
<==fcff(6)*(1+5%)/(wacc-5%)

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