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Question 2 (DCF)

Part A Period (t) 2017A

EBITDA 74,467
EBIT 67,343
Tax rate 26%

EBIT (1-t) 49,834

D&A 7,124
NWC (1,032)
Capital expenditures (9,836)

Part B Debt and Cash of the Firm :

Data as of: 9/24/2017

Commercial paper 8,105

Current portion of long term debt 3,500
Long term debt 75,427
Gross debt 87,032

Cash and equivalents 20,484

Short term marketable securities 46,671
Long term marketable securities 170,430
Nonoperating assets 237,585

Part C Other informations are:

Long term growth rate 4%
Discount rate (r) 10%
EBITDA multiple 9.0x

Part D Shares outstanding

Basic shares outstanding

Effect of dilutive securities
Questions:
(1) calculate firm value using perpetuity approach
(2) calculate the price of each stock using Perpetuity Approach
(3) calculate the firm Value using EBITDA multiple Approach
(4) calculate the price of each stock using EBITDA multiple Approach
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2018P 2019P 2020P 2021P 2022P

78,190 82,099 86,204 90,515 95,040

70,710 74,245 77,957 81,855 85,948
26% 26% 26% 26% 26%

52,325 54,941 57,689 60,573 63,602

7,480 7,854 8,247 8,659 9,092
(929) (836) (753) (677) (610)
(10,278) (10,741) (11,224) (11,729) (12,257)

5,332
50
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Perpetuity Ap
SOL- 1 :
Calculation of Unlevered Free Cash Flows -

Period (t) 2017A 2018P

EBIT 67,343 70,710

TAX 26% 26%
EBT 49,834 52,325
D&A 7,124 7,480
NWC (1,032) (929)
Capital expenditures (9,836) (10,278)

ULFCF 46,090 48,598

WACC 10% 10%
PV of ULFCF 44,180

SUM of PV of ULFCF 203,009

Calculation of Terminal Value -

TV = Last Year ULFCF(1+g)/(WACC-g)
Growth Rate 4%
TV of 2022 1,037,002
PV of TV 643,897

Calculation of Firm Value -

Firm Value = Sum of PV of ULFCF + PV of TV
Firm Value of 2022 846,906

SOL -2 :
Commercial paper 8,105
Current portion of long term debt 3,500
Long term debt 75,427
Gross debt 87,032

Cash and equivalents 20,484

Short term marketable securities 46,671
Long term marketable securities 170,430
Non-operating assets 237,585

Net Debt = Non-operating assets - Gross debt 150,553

New Enterprise Value = Net Debt + Firm Value 997,459.31

No. of Shares (5332 + 50) 5382
Price of each stock 185.33
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Perpetuity Approach

2019P 2020P 2021P 2022P

74,245 77,957 81,855 85,948

26% 26% 26% 26%
54,941 57,688 60,573 63,602
7,854 8,247 8,659 9,092
(836) (753) (677) (610)
(10,741) (11,224) (11,729) (12,257)

51,218 53,958 56,825 59,827

10% 10% 10% 10%
42,329 40,540 38,812 37,148
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EBITDA Multiple Approach

Sol - 3 :

Period (t) 2017A 2018P

EBITDA 74,467 78,190

Calculation of TV
Discount rate (r) 10%
EBITDA multiple 9.0x
Terminal value in 2022 855,363
PV of TV 531,113

Calculation of Firm Value -

Firm Value = Sum of PV of ULFCF + PV of TV
Firm Value of 2022 734,123

SOL - 4 :
Commercial paper 8,105
Current portion of long term debt 3,500
Long term debt 75,427
Gross debt 87,032

Cash and equivalents 20,484

Short term marketable securities 46,671
Long term marketable securities 170,430
Non-operating assets 237,585

Net Debt = Non-operating assets - Gross debt 150,553

New Enterprise Value = Net Debt + Firm Value 583,569.67

No. of Shares (5332 + 50) 5382
Price of each stock 108.43
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iple Approach
2019P 2020P 2021P 2022P

82,099 86,204 90,515 95,040