Ch13 Tool Kit.xlsx

Corporate Valuation

4/11/2010

Chapter 13. Tool Kit for Corporate Valuation, Value-Based Management and Corporate Governance

This spreadsheet has two major components, one for Corporate Valuation and one for Value Based Management. Click on the tabs in the lower left of the screen to switch between sections. The value of a company is the sum of: (1) the value of its assets-in-place, including their associated growth opportunities, which is called the value of operations and (2) the value of its nonoperating assets, such as marketable securities and investments in non-controlled affiliates. The value of operations is the present value of the free cash flows produced by the assets-in-place and their associated growth opportunities.

THE CORPORATE VALUATION MODEL (Section 13.2)

You are given the current and projected financial statements of MagnaVision. Growth is expected to be 5% for each year after the projections. If the WACC is 10.84%, what is the value of operations? INPUT DATA SECTION: Current and Projected Data Used in the Analysis Table 13-1. MagnaVision, Inc.: Income Statements for Years Ending December 31 (in millions of dollars) Actual Projected 2010 2011 2012 2013 2014 $850.0 $1,000.0 $1,100.0 $1,155.0 Net Sales $700.0 Costs (except depreciation) $599.0 $734.0 $911.0 $935.0 $982.0 Depreciation 28.0 31.0 34.0 36.0 38.0 Total operating costs $627.0 $765.0 $945.0 $971.0 $1,020.0 Earning before int. & tax $73.0 $85.0 $55.0 $129.0 $135.0 Less: Net interest 13.0 15.0 16.0 17.0 19.0 Earning before taxes $60.0 $70.0 $39.0 $112.0 $116.0 Taxes (40%) 24.0 28.0 15.6 44.8 46.4 Net income before pref. div. $36.0 $42.0 $23.4 $67.2 $69.6 Preferred div. 6.0 7.0 7.4 8.0 8.3 Net income avail. for com. div. $30.0 $35.0 $16.0 $59.2 $61.3 Common dividends $0.0 $0.0 $0.0 $44.2 $45.3 Addition to retained earnings $30.0 $35.0 $16.0 $15.0 $16.0