Value Merge

Copyright © 2003 by Robert F. Bruner.

Prepared by Mark Miles and Baocheng Yang under the direction of Robert F. Bruner.

This model gives a template for DCF valuation of a target and buyer firm. The model also
estimates EPS dilution/accretion for the buyer. To use the model, enter assumption
values indicated in blue. Please see Chapter 9, "Valuing Firms" of Applied Mergers and
Acquisitions by Robert Bruner for a discussion of this analysis. To use the model, please
follow the instructions in the "Contents" page.

The model intentionally incorporates "circular reference." Do not be alarmed if you are
warned by Microsoft Excel about a circular reference. Simply set your software to
"iterate" so that it produces estimates that are internally consistent--go to
Tools/Options/Calculation and check "Iteration" and insert a number that you believe will
be sufficient (50 iterations should do.) Prepared by Professor Robert F. Bruner,
http://faculty.darden.edu/brunerb/.

This software was prepared solely for non-commercial educational purposes as a supplement to the book, Applied Mergers and
Acquisitions, by Robert F. Bruner. While it has been reviewed with care, and to the best of the author's knowledge performs as
described in the book, the publisher and author do not represent that this software is error-free, and cannot be accountable for
errors or omissions, nor for any liability arising from uses of this software.

ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY, AND FITNESS FOR
A PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED. NEITHER THE AUTHOR OR PUBLISHER SHALL BE LIABLE OR
RESPONSIBLE FOR ANY LOSS, INJURY, CLAIM, LIABILITY, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED
BY OR ARISING IN CONNECTION WITH THE USE OF THIS SOFTWARE, INCLUDING BUT NOT LIMITED TO DEFECTS IN
THE MEDIUM, OR ERRORS, OMISSIONS, OR INACCURACIES IN THE DATA PRODUCED BY THIS SOFTWARE. IF FOR
ANY REASON, BY OPERATION OF LAW OR OTHERWISE, ANY PORTION OF THE FOREGOING LIMITATION OF
LIABILITY SHALL BE VOID OR OTHERWISE UNENFORCEABLE, THEN, IN SUCH EVENT, THE MAXIMUM LIABILITY OF
THE PUBLISHER OR AUTHOR, IF ANY, SHALL BE NOT EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO THE
PUBLISHER BY THE USER FOR THE SOFTWARE.

This software is intended for use as an educational tool, and not as a substitute for legal, financial or other professional or expert
advice. Use by the reader of this software constitutes assent to the terms of use and disclaimer of liability.
Contents Instructions

TAB 1: "Financials" Row BLUE cells are inputs

Operating Assumptions 4 Fill all of these in
Income Statement 42
Balance Sheet 70 RED cells are toggles
Statement of Cash Flows 104 Change these to run different scenarios
Financing Assumptions 136
Depreciation & Amortization Schedule 170 BLACK cells are calculations
Summary Ratios 203 Do not input numbers in these

TAB 2: "Valuation" Row Model is set on automatic calculation, 100 iterations

Cost of Capital 4 No need for user to change settings
Terminal Value 27
WACC Method 47 Target financial data in "merger scenario" tab is linked
Equity Residual 89 to "financials" tab. To run scenarios, user must
Adjusted Present Value 130 input acquiror's financial data in specified blue cells

TAB 3: "Merger Scenario" Row

Assumptions 5
Transaction Adjustments 34
Summary Outputs 56

For addition explanation, see appendix to Chapter 9, Applied Mergers and Acquisitions by Robert F. Bruner.
Company Name
Assumptions Note: "#DIV/0!" likely indicates the needs to enter data somewhere in the model.
Projected
Operating Assumptions 2021 2022 2023 2024 2025 2026 2027 2028
Revenue Growth 57.2% 26.4% 26.4% 26.4% 26.4% 26.4% 26.4%
COGS (Excl Depr) / Revenues 73.1% 72.1% 74.1% 74.1% 74.1% 74.1% 74.1% 74.1%
SG&A / Revenues 18.3% 18.0% 18.5% 18.5% 18.5% 18.5% 18.5% 18.5%
Other Exp (Income) / Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Effective Tax Rate 20.0% 10.4% 16.4% 16.4% 16.4% 16.4% 16.4% 16.4%

Minority Interest / Pre-tax Income 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Income from Affiliates / Pre-tax Income 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Wgtd Average Shares Outstanding (000) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Common Dividends per Share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00

Minimum Cash Balance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Days in Receivables 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Days in Inventory 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Days in Payables 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Current Assets / Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Other Current Liabilities / Revenues 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Capital Expenditures (excl Acquisitions) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Depreciation, Amortization, & Other Years x Declining Financing Assumptions Coupon

Existing Intangible Book Amortization 40 yrs 1.0 x Straight Debt 1 0.0%
Existing Intangible Tax Amortization 15 yrs 1.0 x Straight Debt 2 0.0%
Straight Debt 3 0.0%
Existing PPE Book Depreciation 5 yrs 1.0 x Straight Debt 4 0.0%
Existing PPE Tax Depreciation 4 yrs 1.0 x Straight Debt 5 0.0%
Future CapEx Book Depreciation 20 yrs 1.0 x
Future CapEx Tax Depreciation 7 yrs 2.0 x Straight Preferred Stock 0.0% Strike Price Shares (000)
Convertible Preferred Stock 0.0% $0.00 0
Balance Sheet Shares Outstanding (000) 1,000 Convertible Debt 0.0% $0.00 0

Options / SARs Outstanding (000) 1,000 Int. Rate on Excess Cash 4.0%
Average Strike Price $0.00 Use of Excess Cash Flow 1
(1=Build Cash; 2=Repay Debt)

Interest Rate on Revolver 0.0%

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Company Name
Income Statement
Projected
2021 2022 2023 2024 2025 2026 2027 2028
Revenues $1,410.0 $2,216.0 $2,801.0 $3,540.4 $4,475.1 $5,656.4 $7,149.7 $9,037.1
COGS (excluding Depreciation) 1,030.4 1,598.4 2,075.0 2,622.8 3,315.2 4,190.3 5,296.5 6,694.8
Selling, General, & Administrative 257.6 399.6 518.8 655.8 828.9 1,047.7 1,324.3 1,673.9
EBITDA 122.0 218.0 207.2 261.9 331.0 418.4 528.9 668.5
Depreciation 20.0 21.0 24.0 0.0 0.0 0.0 0.0 0.0
Amortization of Intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Expense (Income) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EBIT 102.0 197.0 183.2 261.9 331.0 418.4 528.9 668.5
Interest (Income) 31.0 38.0 44.0 (4.5) (14.6) (27.5) (43.9) (64.5)
Interest Expense - Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Expense - Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Expense - Revolver 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Pre-Tax Income 71.0 159.0 139.2 266.4 345.7 446.0 572.8 733.0
Income Taxes 14.2 16.5 22.8 43.6 56.6 73.0 93.8 120.1
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Income) from Affilitates 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income 56.8 142.5 116.4 222.7 289.0 372.9 478.9 613.0
Straight Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income to Common 56.8 142.5 116.4 222.7 289.0 372.9 478.9 613.0

Earnings per Share:

Basic $56.80 $142.50 $116.40 $222.73 $289.04 $372.92 $478.94 $612.96
Fully Diluted $28.40 $71.25 $58.20 $111.36 $144.52 $186.46 $239.47 $306.48

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Company Name
Balance Sheet
Projected
2021 2022 2023 2024 2025 2026 2027 2028
Cash and Equivalents 0.0 0.0 0.0 222.7 508.0 868.7 1,324.7 1,900.9
Accounts Receivable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Inventory 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Current Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Current Assets 530.7 745.4 863.5 222.7 508.0 868.7 1,324.7 1,900.9
Property , Plant, & Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accumulated Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Property, Plant, & Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity in Income of Affiliates 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Long-Term Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Assets 726.3 997.5 1,205.2 222.7 508.0 868.7 1,324.7 1,900.9

Accounts Payable 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Current Liabilities (excl. S/T Debt) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Current Liabilities 386.8 468.5 492.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Revolver 0.0 0.0 0.0 0.0 0.0
Total Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Deferred Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Long-Term Liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Liabilities 448.4 596.7 603.5 0.0 0.0 0.0 0.0 0.0
Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Common Stock (Par + APIC+ Other Equity) 278.0 400.9 601.7 601.7 601.7 601.7 601.7 601.7
Retained Earnings 0.0 0.0 0.0 222.7 511.8 884.7 1,363.6 1,976.6
Total Liabilities & Stockholders' Equity 726.3 997.5 1,205.2 824.4 1,113.5 1,486.4 1,965.3 2,578.3

BALANCE SHEET OFF!!! -601.70000 -605.42491 -617.64631 -640.67163 -677.35406

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Company Name
Statement of Cash Flows
Projected
2022 2023 2024 2025 2026 2027 2028
Net Income 142.5 116.4 222.7 289.0 372.9 478.9 613.0
Depreciation 21.0 24.0 0.0 0.0 0.0 0.0 0.0
Amortization of Intangible 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase in Deferred Taxes 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Income from Affiliates 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Non-Cash Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Increase) / Decrease in NWC 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operations 163.5 140.4 222.7 289.0 372.9 478.9 613.0
Capital Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free Cash Flow 163.5 140.4 222.7 289.0 372.9 478.9 613.0
Debt Issuance / (Repayments):
Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Revolver 0.0 0.0 0.0 0.0 0.0
Debt Issuance / (Repayments) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Straight Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Common Stock Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity Issuance / (Repurchases) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other (163.5) (140.4) 0.0 0.0 0.0 0.0 0.0
Change in Cash and Equivalents 0.0 0.0 222.7 289.0 372.9 478.9 613.0

Beginning Cash and Equivalents 0.0 0.0 0.0 219.0 495.8 845.7 1,288.0
Ending Cash and Equivalents 0.0 0.0 222.7 508.0 868.7 1,324.7 1,900.9

Cash Flow from Operations per Share $163.50 $140.40 $222.73 $289.04 $372.92 $478.94 $612.96
Free Cash Flow per Share $163.50 $140.40 $222.73 $289.04 $372.92 $478.94 $612.96

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Company Name
Financing Assumptions
Projected
Amortization / (Issuance) 2023 2024 2025 2026 2027 2028
Straight Debt 1 0.0 0.0 0.0 0.0 0.0
Straight Debt 2 0.0 0.0 0.0 0.0 0.0
Straight Debt 3 0.0 0.0 0.0 0.0 0.0
Straight Debt 4 0.0 0.0 0.0 0.0 0.0
Straight Debt 5 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0
Total Debt Amortization / (Issuance) 0.0 0.0 0.0 0.0 0.0

Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0

Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0
Common Equity 0.0 0.0 0.0 0.0 0.0
Equity Repurchases / (Issuance) 0.0 0.0 0.0 0.0 0.0

Debt / Preferred Balances

Straight Debt 1 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 2 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 3 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 4 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 5 0.0 0.0 0.0 0.0 0.0 0.0
Revolver 0.0 0.0 0.0 0.0 0.0 0.0
Total Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0
Total Debt 0.0 0.0 0.0 0.0 0.0 0.0

Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0

Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Common Equity (excludes R/E) 601.7 601.7 601.7 601.7 601.7 601.7
Total Book Equity 601.7 601.7 601.7 601.7 601.7 601.7

Total Book Capital 601.7 601.7 601.7 601.7 601.7 601.7

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Company Name
Depreciation & Amortization Schedule
Projected
Book Depreciation 2024 2025 2026 2027 2028
Existing PP&E 0.0 0.0 0.0 0.0 0.0

Capital Expenditures (2024-2028): Amount

2024 0.0 0.0 0.0 0.0 0.0 0.0
2025 0.0 0.0 0.0 0.0 0.0
2026 0.0 0.0 0.0 0.0
2027 0.0 0.0 0.0
2028 0.0 0.0
Total Book Depreciation 0.0 0.0 0.0 0.0 0.0

Tax Depreciation Basis

Existing PP&E 0.0 0.0 0.0 0.0 0.0 0.0

Capital Expenditures (2024-2028): Amount

2024 0.0 0.0 0.0 0.0 0.0 0.0
2025 0.0 0.0 0.0 0.0 0.0
2026 0.0 0.0 0.0 0.0
2027 0.0 0.0 0.0
2028 0.0 0.0
Total Tax Depreciation 0.0 0.0 0.0 0.0 0.0

Excess of Tax over Book Depreciation 0.0 0.0 0.0 0.0 0.0
Increase (Decrease) in Deferred Taxes 0.0 0.0 0.0 0.0 0.0

Amortization of Existing Intangible Assets Life

Tax 15 yrs 0.0 0.0 0.0 0.0 0.0
Book 40 yrs 0.0 0.0 0.0 0.0 0.0
Excess of Tax over Book Amortization 0.0 0.0 0.0 0.0 0.0
Increase in Deferred Taxes 0.0 0.0 0.0 0.0 0.0

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Company Name
Summary Ratios

Projected
Income Statement 2021 2022 2023 2024 2025 2026 2027 2028
EBITDA / Revenues 8.7% 9.8% 7.4% 7.4% 7.4% 7.4% 7.4% 7.4%
EBIT / Revenues 7.2% 8.9% 6.5% 7.4% 7.4% 7.4% 7.4% 7.4%
Return on Revenues 4.0% 6.4% 4.2% 6.3% 6.5% 6.6% 6.7% 6.8%

EBITDA / Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBIT / Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!

Return on Average Equity 42.0% 23.2% 31.2% 29.8% 28.7% 27.8% 27.0%
Return on Average Assets 16.5% 10.6% 31.2% 79.1% 54.2% 43.7% 38.0%
Return on Average (Debt+Equity) Capital 42.0% 23.2% 31.2% 29.8% 28.7% 27.8% 27.0%

Balance Sheet
Total Debt / Book Capitalization 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Total Debt / Book Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Total Debt / EBITDA 0.00 x 0.00 x 0.00 x 0.00 x 0.00 x 0.00 x 0.00 x 0.00 x
Tangible Book Value per Share $277.95 $400.85 $601.70 $824.43 $1,113.46 $1,486.38 $1,965.32 $2,578.28

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Company Name
Cost of Capital and Terminal Value Assumptions

Cost of Capital Assumptions

Risk Free Rate 6.0%

Geometric Risk Premium 0.0%

Stock Price $870.00

Equity Market Value ($MM) $6,125
Current Debt / Mkt Equity 78.0%

Effective Tax Rate 10.0%

Cost of Debt (Kd):

Pre-Tax Kd 6.0%
After-Tax Kd 5.0%

Beta Calculations:
Levered 1.00
Unlevered 0.59

Unlevered Ke 6.0%

Note: Relevered betas calculated each year in model

Terminal Value Assumptions

Method of Estimation 1
(1=Multiple;2=Perpetuity)

Perpetuity Growth Rate 5.0%

EBITDA Multiple 10.0 x

P/E Multiple 10.0 x

Debt Tax Shield Growth Rate 0.0%

(APV Method)

Note: We recommend that users run sensitivity analyses

on terminal value assumptions

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Company Name
Diccounted Cash Flow Analysis
WACC Method

Projected
Unlevered Free Cash Flows Now 2024 2025 2026 2027 2028
Net Income 222.7 289.0 372.9 478.9 613.0
Interest Expense 0.0 0.0 0.0 0.0 0.0
Tax Effect of Interest Expense 0.0 0.0 0.0 0.0 0.0
After Tax Interest Expense 0.0 0.0 0.0 0.0 0.0
NOPAT 222.7 289.0 372.9 478.9 613.0

Depreciation 0.0 0.0 0.0 0.0 0.0

Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Income from Affiliates 0.0 0.0 0.0 0.0 0.0
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operations 222.7 289.0 372.9 478.9 613.0

Capital Expenditures 0.0 0.0 0.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0
Unlevered Free Cash Flow 222.7 289.0 372.9 478.9 613.0
Terminal Value (EBITDA Multiple) 0.0 0.0 0.0 0.0 6,685.1
Cash Flows to Capital Providers 222.7 289.0 372.9 478.9 7,298.0

Valuation
Firm Value (end of the year) 6,613.4 7,010.2 7,194.7 7,320.0 7,363.9 7,298.0
Plus: Excess Cash 0.0 222.7 508.0 868.7 1,324.7 1,900.9
Less: Debt Outstanding 0.0 0.0 0.0 0.0 0.0 0.0
Less: Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Less: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Equity Value (end of the year) 6,613.4 7,232.9 7,702.7 8,188.7 8,688.5 9,199.0
Price per Share $6,613.35 $7,232.88 $7,702.71 $8,188.71 $8,688.53 $9,198.96

WACC Calculation
Debt/Market Equity 0.0% 0.0% 0.0% 0.0% 0.0%
Relevered Beta 0.59 0.59 0.59 0.59 0.59
Ke 6.0% 6.0% 6.0% 6.0% 6.0%
WACC 6.0% 6.0% 6.0% 6.0% 6.0%

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Company Name
Disounted Cash Flow Analysis
Equity Residual Method

Projected
Residual Cash Flows Now 2024 2025 2026 2027 2028
Net Income 222.7 289.0 372.9 478.9 613.0
Depreciation 0.0 0.0 0.0 0.0 0.0
Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Income from Affiliates 0.0 0.0 0.0 0.0 0.0
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operations 222.7 289.0 372.9 478.9 613.0

Capital Expenditures 0.0 0.0 0.0 0.0 0.0

Change in Debt 0.0 0.0 0.0 0.0 0.0
Change in Preferred 0.0 0.0 0.0 0.0 0.0
Preferred Dividends (includes convertible) 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0
Residual Cash Flows 222.7 289.0 372.9 478.9 613.0
Terminal Value (P/E Multiple) 0.0 0.0 0.0 0.0 6,129.6
Cash Flows to Common Equity Holders 222.7 289.0 372.9 478.9 6,742.5

Valuation
Equity Value (end of the year) 6,198.2 6,570.1 6,728.2 6,825.6 6,839.8 6,742.5
Price per Share $6,198.23 $6,570.13 $6,728.25 $6,825.56 $6,839.80 $6,742.51

Plus: Debt Outstanding 0.0 0.0 0.0 0.0 0.0 0.0

Plus: Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Plus: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Less: Excess Cash 0.0 222.7 508.0 868.7 1,324.7 1,900.9
Firm Value (end of the year) 6,198.2 6,347.4 6,220.2 5,956.8 5,515.2 4,841.6

Cost of Equity Calculation

Debt/Market Equity 0.0% 0.0% 0.0% 0.0% 0.0%
Relevered Beta 0.59 0.59 0.59 0.59 0.59
Ke 6.0% 6.0% 6.0% 6.0% 6.0%

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Company Name
Discounted Cash Flow Analysis
Adjusted Present Value Method

Projected
Unlevered Free Cash Flows Now 2024 2025 2026 2027 2028
Net Income 222.7 289.0 372.9 478.9 613.0
Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0
Tax Effect of Interest Expense 0.0 0.0 0.0 0.0 0.0 0.0
After Tax Interest Expense 0.0 0.0 0.0 0.0 0.0
NOPAT 222.7 289.0 372.9 478.9 613.0

Depreciation 0.0 0.0 0.0 0.0 0.0

Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes 0.0 0.0 0.0 0.0 0.0
Minority Interest 0.0 0.0 0.0 0.0 0.0
Income from Affiliates 0.0 0.0 0.0 0.0 0.0
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operations 222.7 289.0 372.9 478.9 613.0

Capital Expenditures 0.0 0.0 0.0 0.0 0.0

Other 0.0 0.0 0.0 0.0 0.0
Unlevered Free Cash Flow 222.7 289.0 372.9 478.9 613.0
Terminal Value (EBITDA Multiple) 0.0 0.0 0.0 0.0 6,685.1
Cash Flows to Capital Providers 222.7 289.0 372.9 478.9 7,298.0

Valuation
Unlevered Free Cash Flows 6,613.4 7,010.2 7,194.7 7,320.0 7,363.9 7,298.0
Debt Tax Shield 0.0 0.0 0.0 0.0 0.0 0.0
Firm Value (end of the year) 6,613.4 7,010.2 7,194.7 7,320.0 7,363.9 7,298.0
Plus: Excess Cash 0.0 222.7 508.0 868.7 1,324.7 1,900.9
Less: Debt Outstanding 0.0 0.0 0.0 0.0 0.0 0.0
Less: Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Less: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Equity Value (end of the year) 6,613.4 7,232.9 7,702.7 8,188.7 8,688.5 9,199.0
Price per Share $6,613.35 $7,232.88 $7,702.71 $8,188.71 $8,688.53 $9,198.96

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ABC & XYZ
Merger Scenario - Purchase Accounting
(100% Stock)

Transaction Assumptions Current Valuation ABC XYZ

Target Name ABC Price per Share $870.00 $0.00
Acquiror Name XYZ Merger Price $0.00
Implied Premium -100.0%
Exchange Ratio #DIV/0!
% Cash (input % for all transaction types) 0.0%
Shares Outstanding (in millions) 1.0 0.0
Options / SARs / Converts 0.0
Total Post-Deal Shares 1.0 0.0
Refinance Target Debt (1=yes;2=no) 1
Earnings per Share (basic) 2023 2024E
Refinancing Rate: ABC $116.40 $222.73
YTM on 10-Year Treasuries 0.0% XYZ #DIV/0! $0.00
Spread 0.0% Source of Projections First Call 1/1/1998
Refinancing Rate: 0.0%
2023 Financial Data (in $MM) ABC XYZ
Current Weighted Average Cost of Debt #DIV/0! Revenues 2,801.0 0.0
(Interest Expense / Debt Balance) EBITDA 207.2 0.0
EBIT 183.2 0.0
Effective Tax Rate 16.4% Net Income to Common 116.4 0.0

Base Year for Combination 2023 Existing Goodwill Amortization 0.0 No Entry
Total Cash & Equivalents 0.0 0.0
Excess Cash 0.0 0.0
Note: Combination model excludes effect of transaction expenses Goodwill 0.0 0.0
(i.e., legal, banking, accounting fees) Total Assets 1,205.2 0.0
Total Debt 0.0 0.0
Preferred Equity 0.0 0.0
Common Equity 601.7 0.0

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ABC & XYZ
Transaction Adjustments
Goodwill Created
Pro Forma Net Income (diluted) 2023 2024E 2025E Cost of Equity Acquired 0.0
XYZ's Net Income 0.0 0.0 0.0 Plus: Liabilities Assumed 603.5
ABC's Net Income 116.4 222.7 289.0 Less: Excess Cash 0.0
Unadjusted Combined 116.4 222.7 289.0
Total Consideration 603.5
Transaction Adjustments Less: Adjusted Value of Assets 1,205.2
Identifiable Intangible Assets Amortization 0.0 0.0 0.0 Less: Identified Intangible Assets 0.0
New Interest Expense #DIV/0! #DIV/0! #DIV/0!
Refinancing Adjustments #DIV/0! #DIV/0! #DIV/0! Goodwill Created in Transaction (601.7)
Assumed Combination Synergies 0.0 0.0 0.0
Pre-Tax Adjustments #DIV/0! #DIV/0! #DIV/0! Intabgible Assets Amortization Period 40.0
Income Taxes on Adjustments #DIV/0! #DIV/0! #DIV/0!
After-Tax Adjustments #DIV/0! #DIV/0! #DIV/0! Adjusted Asset Value
Total Assets 1,205.2
Adjusted Net Income #DIV/0! #DIV/0! #DIV/0! Less: Goodwill 0.0
Pro Forma E.P.S #DIV/0! #DIV/0! #DIV/0! Less: Excess Cash 0.0
Plus: Assumed Asset Write Up 0.0
Adjusted Value of Assets 1,205.2

Summary Outputs

Pro Forma Earnings Impact 2023 2024E 2025E 2023 Contribution Analysis ABC XYZ
XYZ's Stand-Alone EPS #DIV/0! $0.00 $0.00 Revenues 100.0% 0.0%
NewCo's Combined EPS #DIV/0! #DIV/0! #DIV/0! EBITDA 100.0% 0.0%

Accretion / (Dilution) #DIV/0! #DIV/0! #DIV/0! NewCo Shares #DIV/0! 0.0

% Ownership #DIV/0! #DIV/0!
Additional Pre-tax Synergies
Required for No Dilution #DIV/0! #DIV/0! #DIV/0!

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 2025E
$289.04
$0.00

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 2021 2022 2023
Turnover 1410 2216 2801
YOY Growth NA 57.16% 26.40%
EBITDA 122 218 207.2
As % of Turnover 8.65% 9.84% 7.40%
EBIT 102 197 183.2
As % of Turnover 7.23% 8.89% 6.54%
PAT 56.8 142.5 116.4
As % of Turnover 4.03% 6.43% 4.16%

Tax Rate
Long-term Growth Rate (for terminal value calculation)
Discount Rate (used in the DCF analysis)

2021 2022
EBIT 102 197
Depreciation & Amortization 20.3 20.56
Capital Expenditures (CapEx) 21.28 72.8
Current Assets 530.7 745.4
Current Liabilities 386.8 468.5
Net working capital 143.81 276.88
Change in Net Working Capital (ΔNWC) 133.07

2021 2022
EBIT 102 197
Depreciation & Amortization 20.3 20.56
Capital Expenditures (CapEx) 21.28 72.8
Change in Net Working Capital (ΔNWC) 133.07
FCFF 63.27 66.17

Enterprise Value: Sum of PV of FCFF and terminal

value
Enterprise Value≈2484.84

Net Debt
90.39
2.53
11.63
254.07
0.73
Net Debt 359.35
 2024 2025 2026 2027 2028
3540.43 4475.07 5656.44 7149.68 9037.12
26.40% 26.40% 26.40% 26.40% 26.40%
261.90 331.04 418.43 528.89 668.51
7.40% 7.40% 7.40% 7.40% 7.40%
261.90 331.04 418.43 528.89 668.51
7.40% 7.40% 7.40% 7.40% 7.40%
95.31 78.02 63.8 52.23 42.72
2.69% 1.74% 1.13% 0.73% 0.47%

2023 2024 2025 2026 2027 2028

183.2 261.90 331.04 418.43 528.89 668.51
23.96 27.91 32.52 37.88 44.14 51.42 0.16537 1.165
108.22 160.17 237.05 350.83 519.22 768.45 0.486538 1.48
863.5
492.0
371.52
94.64 68.14 49.06 35.32 25.43 18.31 -0.288795 0.72

2023 2024 2025 2026 2027 2028

183.2 261.90 331.04 418.43 528.89 668.51
23.96 27.91 32.52 37.88 44.14 51.42
108.22 160.17 237.05 350.83 519.22 768.45
94.64 68.14 49.06 35.32 25.43 18.31
41.57 72.45 89.79 108.35 9.39 −34.22

2484.84
359.35
2125.49