Finite Life Analysis

Summary of Inputs / Cost of Capital Computation

Growth in Total Market =
Target Market Share =
EBITDA Margin =
Riskfree rate =
Tax Rate =
Inflation rate =
Price per unit =
Variable cost per unit =
Marketing cost (Outside retail)
Marketing cost (Apple Stores)
Percent of units sold- outside
Share Price =
Number of Shares Outstanding =
Pre-tax cost of debt =
Interest expense

4.00%
5.00%
NA
3.50%
40%
2.00%
$1,000.00
$400.00
10%
5%
80%
$

350.00
920,000.00 (in 000s)
4.35%
0.0435
$0.00

Allocated Expenses
Item
Current Expenses Growth rate Proportion allocated
G&A
500000
5%
10%
Advertising
1000000
5% -

Capacity Cost
Unit capacity =
Used by computer displays =
Growth in computer displays=
Cost of new capacity =

Synergy benefits
Increment revenue in year 1 =

4000
1200
15%
$500,000 (in current $)

100000

Page 1

Finite Life Analysis

Book Value of Debt =

Average Maturity of Debt =
Market Value of Equity =
Market Value of Interest bearing Debt =
PV of Operating Leases =
Total Debt outstanding =
MV Debt/Equity Ratio =
MV Debt/Capital Ratio =
Unlevered Beta for iTV =
Levered Beta for iTV =
Market Risk Premium =
Cost of Equity =
After-tax Cost of Debt =
Cost of Capital for iTV =
Unlevered beta for iTunes =
Levered beta for iTunes
Cost of equity for iTunes=
Cost of capital for iTunes =
Year
Total Market

$
$
$
$

$0.00
After-tax operating margin =
3.00
322,000,000
1,730,858
1,730,858
0.54%
0.53%
1.7786
1.7843
5.51% (Includes country risk for Brazil and China)
13.33%
2.61%
13.27%
1.10
1.1035
9.58%
9.54%
0
1
2
3
4
30000.00
31200.00
32448.00
33745.92
35095.76

20%

5
36499.59

Page 2

6
37959.57

7
39477.95

8
41057.07

9
42699.35

10
44407.33

Finite Life Analysis

Market Share
Units sold
- Outside retailers
- Apple Stores
Price per unit
Variable cost per unit
Marketing cost per unit (retail)
Marketing cost per unit (Apple)
Revenues
- Production Costs
- Marketing Costs (Retail stores)
- Marketing Costs (Apple stores)
- Deprec'n (including capacity)
- Allocated G&A
- Advertising Exp.
Operating Profit
Taxes
EBIT(1-t)
+ Deprec'n
+ Fixed Allocated Exp (1-t)
- Cap Ex
- Opp. Cost of Capacity
- Chg in WC
+ Salvage Value
After-tax Cashflow
Working Capital Worksheet
Inventory
Accounts Rec
- Acc Payable
Working Capital
Chg in WC

0.00%

(40% marginal tax rate)

2.50%
780.00
624.00
156.00
$1,000.00
$400.00
$100.00
$50.00

3.00%
973.44
778.75
194.69
$1,020.00
$408.00
$102.00
$51.00

$
$
$
$
$
$
$
$
$
$
$
$

780,000
312,000
62,400
7,800
200,000
102,500
126,000
(30,700)
(12,280)
(18,420)
200,000
31,500

$
$
$
$
$
$
$
$
$
$
$
$
$

992,909
397,164
79,433
9,929
200,000
118,773
132,300
55,310
22,124
33,186
200,000
33,075
-

2,200,000

51,480

14,052

15,570

(2,251,480) $

199,028

250,691

$ 31,200.0
$ 39,000.0
$ 18,720.0
$
51,480
$
51,480

$
$

3.50%
1181.11
944.89
236.22
$1,040.40
$416.16
$104.04
$52.02

4.00%
1403.83
1123.06
280.77
$1,061.21
$424.48
$106.12
$53.06

########
491,530
98,306
12,288
200,000
136,652
138,915
151,133
60,453
90,680
200,000
34,729
17,222

$
$
$
$
$
$
$
$
$
$
$
$
$

1,489,756
595,902
119,180
14,898
200,000
156,272
145,861
257,642
103,057
154,585
200,000
36,465
-

19,016

$ 308,187

372,035

$
$
$
$
$
$
$
$
$
$
$
$
$
$

$39,716
$49,645
$23,830
65,532 $
14,052 $

$49,153
$61,441
$29,492
81,102 $
15,570 $

4.50%
1642.48
1313.99
328.50
$1,082.43
$432.97
$108.24
$54.12

$
$
$
$
$
$
$
$
$
$
$
$
$
$

########
711,150
142,230
17,779
200,000
177,780
153,154
375,782
150,313
225,469
200,000
38,288
552,040
20,965

5.00%
1897.98
1518.38
379.60
$1,104.08
$441.63
$110.41
$55.20

$
$
$
$
$
$
$
$
$
$
$
$
$
$

########
838,209
167,642
20,955
227,602
201,333
160,811
478,969
191,588
287,382
227,602
40,203
8,409

$ (109,248) $ 546,778

5.00%
1973.90
1579.12
394.78
$1,126.16
$450.46
$112.62
$56.31

5.00%
2052.85
1642.28
410.57
$1,148.69
$459.47
$114.87
$57.43

$
$
$
$
$
$
$
$
$
$
$
$

########
889,172
177,834
22,229
227,602
212,850
168,852
524,389
209,756
314,634
227,602
42,213
-

$
$
$
$
$
$
$
$
$
$
$
$

########
943,233
188,647
23,581
227,602
225,032
177,295
572,694
229,078
343,616
227,602
44,324
-

8,920

9,463

$ 575,529

$ 606,080

5.00%
2134.97
1707.97
426.99
$1,171.66
$468.66
$117.17
$58.58

$
$
$
$
$
$
$
$
$
$
$
$
$

########
########
200,116
25,015
227,602
237,916
186,159
624,065
249,626
374,439
227,602
46,540
(597,546)
10,038

5.00%
2220.37
1776.29
444.07
$1,195.09
$478.04
$119.51
$59.75

$
$
$
$
$
$
$
$
$
$
$

########
########
212,283
26,535
197,725
251,544
195,467
708,571
283,429
425,143
197,725
48,867
-

$ (175,134) sold
$ 200,000 sold
########
########

$59,590
$71,115
$83,821
$88,917
$94,323
$100,058
$106,142
$74,488
$88,894
$104,776
$111,146
$117,904
$125,073
$132,677
$35,754
$42,669
$50,293
$53,350
$56,594
$60,035
$63,685
98,324 $ 117,340 $ 138,304 $ 146,713 $ 155,634 $ 165,096 $ 175,134
17,222 $ 19,016 $ 20,965 $
8,409 $
8,920 $
9,463 $ 10,038

Page 3

Finite Life Analysis

Capital Expenditure Worksheet

Investment: Infrastructure
Investment: Stores
BV: Beg
Depreciable BV
STL Deprecn
BV: End
Allocated Expenses Worksheet
Total Corporat e G&A
Allocated Corporate G&A
Divisional G&A
Adverstising Expense Worksheet
Without Apparel
With Apparel
Incremental Advertising cost

$
$

2,000,000
200,000

2,200,000

500,000

$
$

1,000,000
1,000,000

Distribution System Worksheet

Capacity used by Commputer displays
Capacity used by ITV
Total capacity used

$ 2,200,000
$ 2,000,000
$ 200,000
$ 2,000,000

$ 2,000,000
$ 1,800,000
$ 200,000
$ 1,800,000

########
########
$ 200,000
########

$
$
$
$

1,600,000
1,400,000
200,000
1,400,000

$
$
$

$
$
$

$ 578,813
$ 57,881
$ 78,771

$
$
$

607,753
60,775
95,497

######## $
######## $
$ 138,915 $

1,215,506
1,361,367
145,861

525,000
52,500
50,000

$ 1,050,000
$ 1,176,000
$ 126,000

30.00%
30.00%

551,250
55,125
63,648

$ 1,102,500
$ 1,234,800
$ 132,300

34.50%
19.50%
54.00%

39.68%
24.34%
64.01%

45.63%
29.53%
75.15%

52.47%
35.10%
87.57%

Expansion Investment
Depreciation on Capacity expansion
Depreciation on Expansion (STL: 20 year life; Salvage=0)
Remaining Balance

Cost of Capital for itv =

Total incremental cashflow

Internal Rate of Return =

$
$
$
$

$ 638,141
$ 63,814
$ 113,966

$ 738,728
$ 73,873
$ 151,159

$ 670,048
$ 67,005
$ 134,328

$ 703,550
$ 70,355
$ 142,495

800,000
600,000
200,000
600,000

$
$
$
$

600,000
400,000
200,000
400,000

$ 775,664
$ 77,566
$ 160,350

$
$
$
$

400,000
200,000
200,000
200,000

$ 814,447
$ 81,445
$ 170,099

########
########
########
########
########
########
########
########
########
########
########
########
$ 153,154 $ 160,811 $ 168,852 $ 177,295 $ 186,159 $ 195,467

60.34%
41.06%
101.40%

69.39%
47.45%
116.84%

79.80%
49.35%
129.15%

91.77%
51.32%
143.09%

105.54%
53.37%
158.91%

$552,040

$597,546

$552,040

$27,602.02 $27,602.02 $27,602.02 $27,602.02

$524,438
$496,836
$469,234
$441,632

121.37%
55.51%
176.88%

-$2,275
$443,908

13.27%

Value of side-benefit (synergy) for iTunes store

Incremental Revenues
After-tax operating income (CF)
PV of cash flows
PV of iTunes synergy =
Year
Cash Flow from iTV
PV of Cash Flows from iTV
Net Present Value of iTV
+ PV of iTunes synergy =
Overall NPV =

########
########
########
########
######## $ 800,000
$ 200,000 $ 200,000 $ 200,000
########
######## $ 800,000

$100,000
$20,000
$18,258

$102,000
$20,400
$17,000

$104,040
$20,808
$15,830

$106,121
$21,224
$14,740

$108,243
$21,649
$13,725

$110,408
$22,082
$12,780

$112,616
$22,523
$11,900

$114,869
$22,974
$11,080

$117,166
$23,433
$10,317

$119,509
$23,902
$9,607

$135,235
0

$
$
$
$
$

(2,251,480) $
(2,251,480) $
(74,421)
135,235
60,814

(2,251,480) $
13.61%

1
199,028
175,704

$
$

2
250,691
195,378

3
$ 308,187
$ 212,041

$
$

4
372,035
225,973

5
6
$ (109,248) $ 546,778
$ (58,580) $ 258,833

7
$ 575,529
$ 240,516

8
$ 606,080
$ 223,601

219,028

271,091

$ 328,995

393,259

$ (87,599) $ 568,859

$ 598,052

$ 629,053

Page 4

9
10
########
########
$ 402,590 $ 301,005

########

########

Summary of Inputs / Cost of Capital Computation

Growth in Total Market =
Target Market Share =
EBITDA Margin =
Riskfree rate =
Tax Rate =
Inflation rate =
Price per unit =
Variable cost per unit =
Marketing cost (Outside retail)
Marketing cost (Apple Stores)
Percent of units sold- outside

4%
5.00%

Allocated Expenses
Item
G&A
Advertising

NA
3.50%
40%
2%
$1,000.00
$400.00
10%
5%
80%

Capacity Cost
Unit capacity =
Used by computer displays =
Growth in computer displays=
Cost of new capacity =

Share Price =
$
350.00
Number of Shares Outstanding =
920,000.00 (in 000s)
Pre-tax cost of debt =
4.35%
Interest expense
$0.00
Book Value of Debt =
$0.00
Average Maturity of Debt =
3.00
Market Value of Equity =
$ 322,000,000
Market Value of Interest bearing Debt$=
PV of Operating Leases =
$
1,730,858
Total Debt outstanding =
$
1,730,858
MV Debt/Equity Ratio =
0.54%
MV Debt/Capital Ratio =
0.53%
Unlevered Beta for Business =
1.7786
Levered Beta =
1.7843
Market Risk Premium =
5.51%
Cost of Equity =
13.33%
After-tax Cost of Debt =
2.61%
Cost of Capital =
13.27%
Unlevered beta for iTunes =
1.10
Levered beta for iTunes
1.10
Cost of equity for iTunes=
9.58%
Cost of capital for iTunes =
9.54%
Year
0
1
Total Market
30000.00
31200.00
Market Share
0.00%
2.50%
Units sold
780.00
- Outside retailers
624.00
- Apple Stores
156.00
Price per unit
$1,000.00
Variable cost per unit
$400.00
Marketing cost per unit (retail)
$100.00
Marketing cost per unit (Apple)
$50.00
Revenues
- Production Costs
- Marketing Costs (Retail stores)
- Marketing Costs (Apple stores)
- Deprec'n (including capacity)

$
$
$
$
$

780,000
312,000
62,400
7,800
200,000

Synergy benefits
Increment revenue in year 1 =
After-tax operating margin =

2
32448.00
3.00%
973.44
778.75
194.69
$1,020.00
$408.00
$102.00
$51.00
$
$
$
$
$

992,909
397,164
79,433
9,929
200,400

3
33745.92
3.50%
1181.11
944.89
236.22
$1,040.40
$416.16
$104.04
$52.02
$ 1,228,824
$ 491,530
$
98,306
$
12,288
$ 201,210

- Allocated G&A
- Advertising Exp.
Operating Profit
Taxes
EBIT(1-t)
+ Deprec'n
+ Fixed Allocated Exp (1-t)
- Cap Ex
- Opp. Cost of Capacity
- Chg in WC
+ Terminal Value
After-tax Cashflow

2,200,000

$
$
$
$
$
$
$
$

51,480

(2,251,480) $

Working Capital Worksheet

Inventory
Accounts Rec
- Acc Payable
Working Capital
Chg in WC
Capital Expenditure Worksheet
Investment: Infrastructure
Investment: Stores
Capital Maintenance
BV: Beg
Depreciable BV
STL Deprecn
BV: End
Allocated Expenses Worksheet
Total Corporat e G&A
Allocated Corporate G&A
Divisional G&A
Adverstising Expense Worksheet
Without Apparel
With Apparel
Incremental Advertising cost

$
$
$
$
$

$
$

2,000,000
200,000

2,200,000

500,000

$
$

1,000,000
1,000,000

Distribution System Worksheet

Capacity used by Commputer displays
Capacity used by ITV
Total capacity used

118,773
132,300
54,910
21,964
32,946
200,400
33,075
208,496

14,052

(4,972) $

31,200.0
39,000.0
18,720.0
51,480
51,480

$
$

15,570

$
$
$
$
$
$
$
$
$
$

136,652
138,915
149,924
59,969
89,954
201,210
34,729
213,525
17,222

42,355

95,146

$39,716
$49,645
$23,830
65,532 $
14,052 $

$49,153
$61,441
$29,492
81,102
15,570

$ 208,496
$ 2,204,000
$ 2,004,000
$ 200,400
$ 2,003,600

$ 213,525
$ 2,212,096
$ 2,012,096
$ 201,210
$ 2,010,887

$
$
$

$
$
$

$
$
$

525,000
52,500
50,000

$ 1,050,000
$ 1,176,000
$
126,000

30.00%
30.00%

13.27%

$
$
$
$
$
$
$
$

$
204,000
$ 2,200,000
$ 2,000,000
$
200,000
$ 2,000,000

Expansion Investment
Depreciation on Capacity expansion
Depreciation on Expansion (STL: 20 year life; Salvage=0)
Remaining Balance on first expansion investment
Time Weighted Return Computation
Cost of Capital for iTV =

102,500
126,000
(30,700)
(12,280)
(18,420)
200,000
31,500
204,000

34.50%
19.50%
54.00%

551,250
55,125
63,648

$ 1,102,500
$ 1,234,800
$ 132,300

39.68%
24.34%
64.01%

578,813
57,881
78,771

$ 1,157,625
$ 1,296,540
$ 138,915

45.63%
29.53%
75.15%

Value of side-benefit (synergy) for iTunes store

Incremental Revenues
After-tax operating income
Terminal value
PV of cash flows
PV of iTunes synergy =
$265,136.68
PV of Cash Flows from iTV
Net Present Value of iTV
PV of iTunes synergy =
NPV =

$
$
$
$

(2,251,480) $
(186,978)
265,137
78,159

$100,000.00 $102,000.00
$20,000.00 $20,400.00
$18,257.62

$104,040.00
$20,808.00

$17,000.38

(4,389) $

IRR Computation (Use the solver or goal seek function to get to IRR)
Incremental Cash flows (iT & ITUnes
-$2,251,480
$15,028
Terminal value (iTV and Itunes)
PV
-$2,251,480
$13,322
NPV
$0.00
IRR
12.81%

33,009

$15,829.72

65,463

$62,755

$115,954

$49,314

$80,773

st of Capital Computation

llocated Expenses
Current Expenses
Growth rate
Proportion allocated
500000
5%
10%
1000000
5% -

apacity Cost
nit capacity =
sed by computer displays =
rowth in computer displays=
ost of new capacity =

ynergy benefits
crement revenue in year 1 =
fter-tax operating margin =

4
35095.76
4.00%
1403.83
1123.06
280.77
$1,061.21
$424.48
$106.12
$53.06
$ 1,489,756
$ 595,902
$ 119,180
$
14,898
$ 202,441

4000
1200
15%
$500,000.00 (in current $)

100000
20%

5
36499.59
4.50%
1642.48
1313.99
328.50
$1,082.43
$432.97
$108.24
$54.12
$ 1,777,875
$
711,150
$
142,230
$
17,779
$
204,110

6
37959.57
5.00%
1897.98
1518.38
379.60
$1,104.08
$441.63
$110.41
$55.20
$ 2,095,522
$ 838,209
$ 167,642
$
20,955
$ 233,836

7
39477.95
5.00%
1973.90
1579.12
394.78
$1,126.16
$450.46
$112.62
$56.31
$ 2,222,929
$ 889,172
$ 177,834
$
22,229
$ 236,438

8
41057.07
5.00%
2052.85
1642.28
410.57
$1,148.69
$459.47
$114.87
$57.43
$ 2,358,083
$ 943,233
$ 188,647
$
23,581
$ 239,543

9
42699.35
5.00%
2134.97
1707.97
426.99
$1,171.66
$468.66
$117.17
$58.58
$
$
$
$
$

2,501,455
1,000,582
200,116
25,015
243,182

10
44407.33
5.00%
2220.37
1776.29
444.07
$1,195.09
$478.04
$119.51
$59.75
$
$
$
$
$

2,653,543
1,061,417
212,283
26,535
217,510

$
$
$
$
$
$
$
$

156,272
145,861
255,201
102,080
153,121
202,441
36,465
219,129

19,016

$
$
$
$
$
$
$
$
$
$

153,882

$
$

177,780
153,154
371,672
148,669
223,003
204,110
38,288
225,354
552,040
20,965

$
$
$
$
$
$
$
$
$
$

201,333
160,811
472,735
189,094
283,641
233,836
40,203
232,253
8,409

$
$
$
$
$
$
$
$

212,850
168,852
515,553
206,221
309,332
236,438
42,213
239,887

$
$
$
$
$
$
$
$

225,032
177,295
560,753
224,301
336,452
239,543
44,324
248,323

8,920

(332,957) $

317,018

339,176

$59,590
$74,488
$35,754
98,324 $
17,222 $

$71,115
$88,894
$42,669
117,340 $
19,016 $

$83,821
$104,776
$50,293
138,304 $
20,965 $

$88,917
$111,146
$53,350
146,713 $
8,409 $

9,463

$
$
$
$
$
$
$
$
$
$

237,916
186,159
608,485
243,394
365,091
243,182
46,540
257,637
(597,546)
10,038

362,533

984,683

$94,323
$117,904
$56,594
155,634 $
8,920 $

$
$
$
$
$
$
$
$

251,544
195,467
688,786
275,514
413,272
217,510
48,867
267,917

$
$
$

4,141,620
4,553,352

$100,058
$125,073
$60,035
165,096 $
9,463 $

$106,142
$132,677
$63,685
175,134
10,038

$ 219,129
$ 2,224,412
$ 2,024,412
$ 202,441
$ 2,021,971

$
225,354
$ 2,241,099
$ 2,041,099
$
204,110
$ 2,036,990

$ 232,253
$ 2,262,343
$ 2,062,343
$ 206,234
$ 2,056,109

$ 239,887
$ 2,288,362
$ 2,088,362
$ 208,836
$ 2,079,526

$ 248,323
$ 2,319,413
$ 2,119,413
$ 211,941
$ 2,107,472

$
$
$
$
$

257,637
2,355,795
2,155,795
215,580
2,140,216

$
$
$
$
$

267,917
2,397,853
2,197,853
219,785
2,178,068

$
$
$

$
$
$

$
$
$

$
$
$

$
$
$

738,728
73,873
151,159

$
$
$

775,664
77,566
160,350

$
$
$

814,447
81,445
170,099

$ 1,477,455
$ 1,654,750
$ 177,295

$
$
$

1,551,328
1,737,488
186,159

$
$
$

1,628,895
1,824,362
195,467

607,753
60,775
95,497

$ 1,215,506
$ 1,361,367
$ 145,861

52.47%
35.10%
87.57%

638,141
63,814
113,966

$ 1,276,282
$ 1,429,435
$
153,154

60.34%
41.06%
101.40%

670,048
67,005
134,328

$ 1,340,096
$ 1,500,907
$ 160,811

69.39%
47.45%
116.84%

703,550
70,355
142,495

$ 1,407,100
$ 1,575,952
$ 168,852

79.80%
49.35%
129.15%

91.77%
51.32%
143.09%

$552,040

$552,040

105.54%
53.37%
158.91%

121.37%
55.51%
176.88%

$597,546.28
$27,602.02
$524,438

$27,602.02
$496,836

$27,602.02
$469,234

$27,602.02
$441,632

-$2,275
$443,908

$106,120.80
$21,224.16

$108,243.22
$21,648.64

$110,408.08
$22,081.62

$112,616.24
$22,523.25

$114,868.57
$22,973.71

$117,165.94
$23,433.19

$14,739.66

$13,724.67

$12,779.58

$11,899.56

$11,080.14

$10,317.15

93,468

(178,537) $

150,070

141,743

133,750

320,708

$175,107

-$311,309

$339,100

$361,699

$385,507

$1,008,117

$108,129

-$170,409

$164,547

$155,586

$146,999

$340,764

$119,509.26
$23,901.85
$323,200.13
$139,508.19

1,309,219

$435,633
$4,111,297
$1,362,455

Terminal year
44407.33
5.00%
2220.37
1776.29
444.07
$1,218.99
$487.60
$121.90
$60.95
$
$
$
$
$

2,706,614
1,082,646
216,529
27,066
221,860

mature market (1)

stable market share (2)
(1)*(2)
units sold constant
80% for retailers
20% for apple stores
price grows at inflation rate
variable production cost grows at inflation rate
marketing cost for retailers = 10% of the price per unit sold
marketing cost for apple stores= 5% of the price per unit sold
Price*nb units sold
cost per unit*units sold
marketing cost per unit for retailers * units sold by retailers
marketing cost per unit for apple stores * units sold by apple stores
Assumption that year 11's depreciation = year 10's depreciation * (1+inflation)

$
$
$
$
$
$
$
$

256,575
199,377
702,562
281,025
421,537
221,860
49,844
226,297

same assumption for G&A

same assumption for advertising expenses
revenues-operating costs
taxes (40%)
Ebit (1-t)
add depreciation see infra
Cancel the effect of the allocated G&A
we need to maintain the level of capital : maintenance costs = economic depreciation
// before
$
WC not restituted because the project continues
terminal value: growing perpetuity with next year's CF of 466 944 and g=inflation
$
466,944 EBIT (1-t)+ depreciation-G&A(1-t)- economic depreciation

it simply grows at inflation rate

20% operating margin
terminal value at year 10 of a growing perpetuity starting at year 11
discounted to time 0

Incremental cash flows at time 10

Value at time 10 of the growing perpetuity starting at time 11

omic depreciation

Beta

Company Name

Market Capitalization [Latest]

AuraSound, Inc.
Klegg Electronics Inc.
Digital Video Systems, Inc
SLS International Inc.
Sonicblue Inc.
Avisio, Inc
QRS Music Technologies, Inc.
Electronic Game Card Inc.
ZVUE Corporation
Koss Corp.
LOUD Technologies Inc.
Singing Machine Co. Inc
DnC Multimedia Corporation
Rockford Corp.
Phoenix Gold International, Inc.
DEI Holdings, Inc.
Wells-Gardner Electronics Corp.
Defense Technology Systems Inc.
Cobra Electronics Corp.
Emerson Radio Corp.
Universal Electronics Inc.
Mad Catz Interactive Inc.
Interact-TV Inc.
Harman International Industries Inc.
GTX Corp
Sum

$16.80
$1.06
$2.80
$1.14
$1.16
$2.52
$2.45
$1.84
$2.28
$53.70
$0.41
$1.55
$5.00
$15.40
$1.85
$45.10
$28.40
$4.00
$23.30
$71.10
$354.80
$100.80
$1.50
$3,395.00
$2.81
$4,136.77

Aggregate

Page 16

Beta

Levered beta for sector =

D/E Ratio for sector =
Unlevered beta for sector =
Cash/ Firm Value =
Unlevered beta corrected for cash

1.67
17.86%
1.51
15.19%
1.78

Page 17

Beta

Cash And Equivalents [Latest Annual]

Total Debt [Latest Annual]

2 Year Beta

$0.13
$0.05
$1.20
$0.80
$2.80
$1.60
$1.05
$2.20
$1.10
$0.13
$0.15
$0.87
$3.25
$1.85
$0.30
$0.20
$0.50
$0.20
$1.13
$15.10
$54.20
$2.25
$0.10
$645.60
$0.46
$737.21

$3.00
$0.00
$0.00
$0.00
$5.00
$2.93
$2.00
$1.50
$0.00
$1.25
$0.00
$4.15
$0.50
$4.45
$0.80
$15.00
$8.30
$1.20
$18.00
$5.86
$35.00
$18.30
$0.15
$379.70
$0.00
$507.09

0.65
1.80
1.53
1.65
2.88
2.13
2.12
1.67
1.78
1.19
0.95
1.56
1.30
2.25
2.23
1.77
1.75
1.76
1.02
1.10
1.31
1.42
1.60
1.98
2.37

Average
Median

Page 18

1.671
1.670

Beta

Page 19

Beta

Firm ValueEnterprise ValueD/E Ratio Cash/Firm Value

$19.80
$1.06
$2.80
$1.14
$6.16
$5.45
$4.45
$3.34
$2.28
$54.95
$0.41
$5.70
$5.50
$19.85
$2.65
$60.10
$36.70
$5.20
$41.30
$76.96
$389.80
$119.10
$1.65
$3,774.70
$2.81
$4,643.87

$19.67
$1.01
$1.60
$0.34
$3.36
$3.85
$3.40
$1.14
$1.18
$54.83
$0.26
$4.83
$2.25
$18.00
$2.35
$59.90
$36.20
$5.00
$40.17
$61.86
$335.60
$116.85
$1.55
$3,129.10
$2.36
$3,906.66

17.86%
0.00%
0.00%
0.00%
431.03%
116.27%
81.63%
81.52%
0.00%
2.33%
0.00%
267.74%
10.00%
28.90%
43.24%
33.26%
29.23%
30.00%
77.25%
8.24%
9.86%
18.15%
10.27%
11.18%
0.00%

0.66%
4.72%
42.86%
70.18%
45.45%
29.36%
23.60%
65.87%
48.25%
0.23%
36.32%
15.19%
59.09%
9.32%
11.32%
0.33%
1.36%
3.85%
2.74%
19.62%
13.90%
1.89%
6.05%
17.10%
16.19%

12.26%
52.32%
17.86%

15.87%
21.82%
15.19%

Page 20

Operating Leases

Operating Lease Converter

Operating lease expenses are really financial expenses, and should be treated as such. Accounting standards allow th
be treated as operating expenses. This program will convert commitments to make operating leases into debt and
adjust the operating income accordingly, by adding back the imputed interest expense on this debt.
Inputs
Operating lease expense in current year =
Operating Lease Commitments (From footnote to financials)
Year
Commitment ! Year 1 is next year, .
1
$ 266,000.00
2
$ 267,000.00
3
$ 260,000.00
4
$ 244,000.00
5
$ 226,000.00
6 and beyond $ 826,000.00
Pre-tax Cost of Debt =

$ 271,000.00

4.35%

Output
Number of years embedded in yr 6 estimate =

3
! I use the average lease expense over the first five years
$ 252,600.00 to estimate the number of years of expenses in yr 6

Converting Operating Leases into debt

Year
Commitment
Present Value
1 $ 266,000.00 $
254,911.36
2 $ 267,000.00 $
245,203.32
3 $ 260,000.00 $
228,821.06
4 $ 244,000.00 $
205,787.98
5 $ 226,000.00 $
182,661.14
6 and beyond $ 275,333.33 $
613,472.79 ! Commitment beyond year 6 converted into an annuity for 3 years
Debt Value of leases =
$
1,730,857.66

Page 21

Operating Leases

rter

over the first five years

f expenses in yr 6

nnuity for 3 years

Page 22