INPUTSFORVALUATION

CurrentInputs
Enterthecurrentrevenuesofthefirm= $12,406
Enterrthecurrentoperatingincomeofthefirm= $855
Enterthecurrentcapitalexpenditures= $233
Enterthecurrentdollardepreciationforthefirm= $298
EnterthechangeinWorkingCapitalinlastyear= $115
Enterthevalueofcurrentdebtoutstanding= $
CashandMarketableSecuritiesatthefirm= $850
Valueofequityoptionsissuedbythefirm= $1,500
Enterthenumberofsharesoutstanding= 1,500.00

HighGrowthPeriod YourInputs
Enterthegrowthrateinrevenuesforthenext5years= 30.00%

Yourcurrentpretaxoperatingmarginis 6.89%

Enterthepretaxoperatingmarginyouexpectyourfirmtohaveinyear5 30.00% (OperatingExpensesincludedepreciation:Thisisequalto(1EBIT/Sales))

Howmuchdebtdoyouplantouseinfinancinginvestments? 0%

Enterthegrowthrateincapitalexpenditures&depreciation 30.00%
Enterworkingcapitalasapercentofrevenues 7.50%

Enterthetaxratethatyouhaveoncorporateincome 36.00%

Whatbetadoyouwanttousetocalculatecostofequity= 1.25

Enterthecurrentlongtermbondrate= 6.50%

Enterthemarketriskpremiumyouwanttouse= 5.50%

Enteryourcostofborrowingmoney= 8.50%
StablePeriod

Enterthegrowthrateinrevenues= 6.00%

Enterthepretaxoperatingmargininperpetuity= 25.00%
Aswath Damodaran:
Yes or no. If yes, enter
the return on capital
that the firm will have
in stable growth. If no,
enter the cap ex as a
percent of depreciation.

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 Aswath Damodaran:
Doyouwanttocomputereinvestmentfromfundamentals? Yes Yes or no. If yes, enter
the return on capital
Returnoncapitalinperpetuityforthefirm= 12.00% that the firm will have
in stable growth. If no, Aswath Damodaran:
Entercapitalexpendituresasapercentofdepreciationinthisperiod 200.00% enter the cap ex as a If you want the firm to
percent of depreciation. grow in perpetuity, this
Howmuchdebtdoyouplantouseinfinancinginvestments? 5.00% number should be
greater than 100%.
Enterinterestrateofdebtinstableperiod= 7.50%

Whatbetadoyouwanttouseinthestableperiod= 1.10
ESTIMATEDCASHFLOWS

Base 1 2 3 4 5 6 7 8 9 10

GrowthinRevenue 30.00% 30.00% 30.00% 30.00% 30.00% 25.20% 20.40% 15.60% 10.80% 6.00%

GrowthinDeprec'n 30.00% 30.00% 30.00% 30.00% 30.00% 25.20% 20.40% 15.60% 10.80% 6.00%

Revenues $12,406 $16,128 $20,966 $27,256 $35,433 $46,063 $57,670 $69,435 $80,267 $88,936 $94,272

COGS
%ofRevenues 93.11% 88.49% 83.86% 79.24% 74.62% 70.00% 71.00% 72.00% 73.00% 74.00% 75.00%

$COGS $11,551 $14,271 $17,583 $21,599 $26,441 $32,244 $40,946 $49,993 $58,595 $65,813 $70,704

EBIT $855 $1,857 $3,383 $5,657 $8,992 $13,819 $16,724 $19,442 $21,672 $23,123 $23,568
TaxRate 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00% 36.00%

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EBIT(1t) $547 $1,188 $2,165 $3,621 $5,755 $8,844 $10,704 $12,443 $13,870 $14,799 $15,084

+Depreciation $298 $387 $504 $655 $851 $1,106 $1,385 $1,668 $1,928 $2,136 $2,264

CapitalExpenditures $233 $303 $394 $512 $665 $865 $2,573 $4,281 $5,990 $7,698 $9,406

ChangeinWC $115 $279 $363 $472 $613 $797 $871 $882 $812 $650 $400

=FCFF $497 $994 $1,912 $3,292 $5,327 $8,288 $8,645 $8,947 $8,996 $8,587 $7,542

TerminalValue(in'05) $129,724
COSTSOFEQUITYANDCAPITAL

1 2 3 4 5 6 7 8 9 10
CostofEquity 13.38% 13.38% 13.38% 13.38% 13.38% 13.21% 13.05% 12.88% 12.72% 12.55%

ProportionofEquity 100.00% 100.00% 100.00% 100.00% 100.00% 99.00% 98.00% 97.00% 96.00% 95.00%

AftertaxCostofDebt 5.44% 5.44% 5.44% 5.44% 5.44% 5.31% 5.18% 5.06% 4.93% 4.80%

ProportionofDebt 0.00% 0.00% 0.00% 0.00% 0.00% 1.00% 2.00% 3.00% 4.00% 5.00%

CostofCapital 13.38% 13.38% 13.38% 13.38% 13.38% 13.13% 12.89% 12.65% 12.40% 12.16%

CumulativeWACC 113.38% 128.54% 145.73% 165.22% 187.32% 211.92% 239.23% 269.48% 302.91% 339.75%

PresentValue $877 $1,488 $2,259 $3,224 $4,425 $4,079 $3,740 $3,338 $2,835 $40,402

FIRMVALUATION

ValueofFirm $66,667

+Cashandmarketablesecurities= $850

ValueofDebt $

ValueofEquity $67,517

ValueofEquityoptionsissuedbyfirm $1,500

ValueofEquityperShare $44.01

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Valueoffirmbyyear $66,667 $74,590 $82,654 $90,417 $97,183 $101,893 $106,628 $111,423 $116,517 $122,382
$ValueofDebt $ $ $ $ $ $1,019 $2,133 $3,343 $4,661 $6,119

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