BPL Inc.

VALUATION CASE STUDY

Key Information
Assets
Net Working Capital
Non-Cash Working Capital
Fixed Assets
Sales
Net Income
Equity
Debt

Key Assumptions
Market Size ($ Million)
Market growth (per year)
Market Share (per year)
Year 1
Year 2
Cost of Goods Sold (% of Sales)
Marketing Expenses (% of Sales)
Administrative Expenses (% of Sales)
Capital Expenditure ($ million per year)
Depreciation ( per year)
Interest rate ( per year)
Tax rate ( per year)
Growth rate of FCF

Estimating Cost of Equity

ODY
TWU
NEK

ODY
TWU
NEK

ODY
TWU

NEK
Average Unlevered Beta
BPL D/E Ratio
BPL Levered Beta
Risk Free Rate
Equity Market Return
Equity Risk Premium
BPL Cost of Equity

BPL FORECASTINGS
Year 1

Year 2

Fixed Assets & Depreciation

Opening Book Value
Capital expenditure
Depreciation
Closing Book Value

Year 1

Year 2

Debt
Initial Debt
Payments
Additional Debt
Ending Debt
Interest Expenses

Year 1

Year 2

Non-Cash Working Capital

Initial NCWC
Change in NCWC
Ending NCWC

Year 1

Year 2

Year 1

Year 2

Market Size
Market Share
Income from Sales
Change in Sales
Change in NCWC/ Change in Sales
Change in NCWC

INCOME STATEMENT (Forecasted)

Income from Sales
Cost of Goods Sold

Gross Profit
Sell. & Adm. Expenses
Marketing Expenses
Administrative Expenses
EBITDA
Depreciation
EBIT
Interest Expense
Earnings Before Tax
Tax
Net Income

Forecasting Free Cash Flows

Net Income
Add: Interest x (1 - Tax)
Add Depreciation
Less Investment in Working Capital
Less Capital Expenditure
Free Cash Flow from Operation (FCFO)

Debt
Interest Paid
Free Cash Flow to Shareholders
PV of FCF to Shareholders

Year 1

Year 2

Terminal Value

BPL Inc. VALUATION CASE STUDY

Key Information
Assets
Net Working Capital
Non-Cash Working Capital
Fixed Assets
Sales
Net Income
Equity
Debt

100
10
9
80
75
7.5
75
25

Key Assumptions
Market Size ($ Million)
Market growth (per year)
Market Share (per year)
Year 1
Year 2
Cost of Goods Sold (% of Sales)
Marketing Expenses (% of Sales)
Administrative Expenses (% of Sales)
Capital Expenditure ($ million per year)
Depreciation ( per year)
Interest rate ( per year)
Tax rate ( per year)
Growth rate of FCF

750
5%
15%
20%
35%
20%
15%
15
5%
6.50%
30%
3.5%

Estimating Cost of Equity

BETA (levered)

ODY
TWU
NEK

1.4
1.1
1.3

ODY
TWU
NEK

D/E
1.00
0.25
0.67
BETA (unlevered)

ODY
TWU

0.70
0.88

NEK
Average Unlevered Beta
BPL D/E Ratio
BPL Levered Beta
Risk Free Rate
Equity Market Return
Equity Risk Premium
BPL Cost of Equity

0.78
0.79
0.67
1.31
3.0%
10.0%
7.0%
12.2%

BPL FORECASTINGS
Market Size
Market Share
Income from Sales
Change in Sales
Change in NCWC/ Change in Sales
Change in NCWC

Year 1
788
15%
118
43
0.05
2.2

Year 2
827
20%
165
47
0.08
3.8

Fixed Assets & Depreciation

Opening Book Value
Capital expenditure
Depreciation
Closing Book Value

Year 1
80.0
15.0
4.8
90.3

Year 2
90.3
15.0
5.3
100.0

Debt
Initial Debt
Payments
Additional Debt
Ending Debt
Interest Expenses

Year 1
25
-5
5
25.0
1.6

Year 2
25.0
-5
5
25.0
1.6

Non-Cash Working Capital

Initial NCWC
Change in NCWC
Ending NCWC

Year 1
9.0
2.2
11.2

Year 2
11.2
3.8
14.9

Year 1
118
41

Year 2
165
58

INCOME STATEMENT (Forecasted)

Income from Sales
Cost of Goods Sold

Gross Profit

77

107

Sell. & Adm. Expenses

Marketing Expenses
Administrative Expenses

24
18

33
25

35
4.8
30.7
1.6
29.1
8.7
20.3

50
5.3
44.4
1.6
42.7
12.8
29.9

Year 1

Year 2

20.3
1.1
4.8
-2.2
-15.0
9.1

29.9
1.1
5.3
-3.8
-15.0
17.5

0
-1.6
7.5

0
-1.6
15.9

EBITDA
Depreciation
EBIT
Interest Expense
Earnings Before Tax
Tax
Net Income

Forecasting Free Cash Flows

Net Income
Add: Interest x (1 - Tax)
Add Depreciation
Less Investment in Working Capital
Less Capital Expenditure
Free Cash Flow from Operation (FCFO)

Debt
Interest Paid
Free Cash Flow to Shareholders
PV of FCF to Shareholders

153.6

Terminal Value

189.7