Value Merge

Copyright 2003 by Robert F. Bruner.

Prepared by Mark Miles and Baocheng Yang under the direction of Robert F. Bruner.
This model gives a template for DCF valuation of a target and buyer firm. The model also
estimates EPS dilution/accretion for the buyer. To use the model, enter assumption values
indicated in blue. Please see Chapter 9, "Valuing Firms" of Applied Mergers and
Acquisitions by Robert Bruner for a discussion of this analysis. To use the model, please
follow the instructions in the "Contents" page.
The model intentionally incorporates "circular reference." Do not be alarmed if you are
warned by Microsoft Excel about a circular reference. Simply set your software to "iterate"
so that it produces estimates that are internally consistent--go to Tools/Options/Calculation
and check "Iteration" and insert a number that you believe will be sufficient (50 iterations
should do.) Prepared by Professor Robert F. Bruner, http://faculty.darden.edu/brunerb/.
This software was prepared solely for non-commercial educational purposes as a supplement to the book, Applied Mergers and
Acquisitions , by Robert F. Bruner. While it has been reviewed with care, and to the best of the author's knowledge performs as
described in the book, the publisher and author do not represent that this software is error-free, and cannot be accountable for
errors or omissions, nor for any liability arising from uses of this software.
ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY, AND FITNESS FOR A
PARTICULAR PURPOSE, ARE HEREBY DISCLAIMED. NEITHER THE AUTHOR OR PUBLISHER SHALL BE LIABLE OR
RESPONSIBLE FOR ANY LOSS, INJURY, CLAIM, LIABILITY, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED
BY OR ARISING IN CONNECTION WITH THE USE OF THIS SOFTWARE, INCLUDING BUT NOT LIMITED TO DEFECTS IN
THE MEDIUM, OR ERRORS, OMISSIONS, OR INACCURACIES IN THE DATA PRODUCED BY THIS SOFTWARE. IF FOR
ANY REASON, BY OPERATION OF LAW OR OTHERWISE, ANY PORTION OF THE FOREGOING LIMITATION OF LIABILITY
SHALL BE VOID OR OTHERWISE UNENFORCEABLE, THEN, IN SUCH EVENT, THE MAXIMUM LIABILITY OF THE
PUBLISHER OR AUTHOR, IF ANY, SHALL BE NOT EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO THE PUBLISHER
BY THE USER FOR THE SOFTWARE.
This software is intended for use as an educational tool, and not as a substitute for legal, financial or other professional or expert
advice. Use by the reader of this software constitutes assent to the terms of use and disclaimer of liability.

Contents

Instructions

TAB 1: "Financials"
Operating Assumptions
Income Statement
Balance Sheet
Statement of Cash Flows
Financing Assumptions
Depreciation & Amortization Schedule
Summary Ratios

Row
4
42
70
104
136
170
203

BLUE cells are inputs

Fill all of these in

TAB 2: "Valuation"
Cost of Capital
Terminal Value
WACC Method
Equity Residual
Adjusted Present Value

Row
4
27
47
89
130

Model is set on automatic calculation, 100 iterations

No need for user to change settings

TAB 3: "Merger Scenario"

Assumptions
Transaction Adjustments
Summary Outputs

Row
5
34
56

RED cells are toggles

Change these to run different scenarios
BLACK cells are calculations
Do not input numbers in these

Target financial data in "merger scenario" tab is linked

to "financials" tab. To run scenarios, user must
input acquiror's financial data in specified blue cells

For addition explanation, see appendix to Chapter 9, Applied Mergers and Acquisitions by Robert F. Bruner.

Company Name
Assumptions

Note: "#DIV/0!" likely indicates the needs to enter data somewhere in the model.

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2002
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2003
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2004
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

1,000
$0.00

1,000
$0.00

1,000
$0.00

1,000
$0.00

1,000
$0.00

1,000
$0.00

1,000
$0.00

1,000
$0.00

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0

Depreciation, Amortization, & Other

Existing Intangible Book Amortization
Existing Intangible Tax Amortization

Years
40 yrs
15 yrs

x Declining
1.0 x
1.0 x

Existing PPE Book Depreciation

Existing PPE Tax Depreciation
Future CapEx Book Depreciation
Future CapEx Tax Depreciation

5 yrs
4 yrs
20 yrs
7 yrs

1.0 x
1.0 x
1.0 x
2.0 x

Strike Price

Shares (000)

$0.00
$0.00

0
0

Operating Assumptions
Revenue Growth
COGS (Excl Depr) / Revenues
SG&A / Revenues
Other Exp (Income) / Revenues
Effective Tax Rate
Minority Interest / Pre-tax Income
Income from Affiliates / Pre-tax Income
Wgtd Average Shares Outstanding (000)
Common Dividends per Share
Minimum Cash Balance
Days in Receivables
Days in Inventory
Days in Payables
Other Current Assets / Revenues
Other Current Liabilities / Revenues
Capital Expenditures (excl Acquisitions)

2001

Balance Sheet Shares Outstanding (000)

1,000

Options / SARs Outstanding (000)

Average Strike Price

1,000
$0.00

Financing Assumptions
Straight Debt 1
Straight Debt 2
Straight Debt 3
Straight Debt 4
Straight Debt 5

Coupon

0.0%
0.0%
0.0%
0.0%
0.0%

Straight Preferred Stock

Convertible Preferred Stock
Convertible Debt

0.0%
0.0%
0.0%

Int. Rate on Excess Cash

Use of Excess Cash Flow
(1=Build Cash; 2=Repay Debt)

4.0%
1

Interest Rate on Revolver

0.0%

12/10/20147:41 AM
Page 3

Company Name
Income Statement

Revenues
COGS (excluding Depreciation)
Selling, General, & Administrative
EBITDA
Depreciation
Amortization of Intangibles
Other Expense (Income)
EBIT
Interest (Income)
Interest Expense - Straight Debt
Interest Expense - Convertible Debt
Interest Expense - Revolver
Pre-Tax Income
Income Taxes
Minority Interest
(Income) from Affilitates
Net Income
Straight Preferred Dividends
Convertible Preferred Dividends
Net Income to Common
Earnings per Share:
Basic
Fully Diluted

2001
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2002
$0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2003
$0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2004
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
0.0
#DIV/0!

NM
NM

NM
NM

NM
NM

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

12/10/20147:41 AM
Page 4

Company Name
Balance Sheet
2001
0.0
0.0
0.0
0.0
0.0

2002
0.0
0.0
0.0
0.0
0.0

2003
0.0
0.0
0.0
0.0
0.0

2004
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Property , Plant, & Equipment

Accumulated Depreciation
Net Property, Plant, & Equipment
Intangible assets
Goodwill
Equity in Income of Affiliates
Other Long-Term Assets
Total Assets

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
0.0
0.0

0.0
0.0
0.0
0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
0.0
#DIV/0!

Accounts Payable
Other Current Liabilities (excl. S/T Debt)
Total Current Liabilities

0.0
0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

Straight Debt
Convertible Debt
Revolver
Total Debt

0.0
0.0

0.0
0.0

0.0
0.0

0.0

0.0

0.0

0.0
0.0
#DIV/0!
0.0

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

Deferred Taxes
Minority Interest
Other Long-Term Liabilities
Total Liabilities

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

#DIV/0!
0.0
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!

Straight Preferred Stock

Convertible Preferred Stock
Common Stock (Par + APIC+ Other Equity)
Retained Earnings
Total Liabilities & Stockholders' Equity

0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!
#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

Cash and Equivalents

Accounts Receivable
Inventory
Other Current Assets
Total Current Assets

#DIV/0!

12/10/20147:41 AM
Page 5

Company Name
Statement of Cash Flows
2002
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2003
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2004
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

2005
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

2007
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

2008
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0

0.0
0.0

0.0
#DIV/0!

0.0
0.0

0.0
#DIV/0!

0.0
#DIV/0!

0.0
#DIV/0!

0.0
0.0

0.0
0.0

0.0

0.0

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!

Straight Preferred Dividends

Convertible Preferred Dividends
Common Stock Dividends
Equity Issuance / (Repurchases)
Other
Change in Cash and Equivalents

0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!

Beginning Cash and Equivalents

Ending Cash and Equivalents

0.0
0.0

0.0
0.0

0.0
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

$0.00
$0.00

$0.00
$0.00

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

Net Income
Depreciation
Amortization of Intangible
Increase in Deferred Taxes
Minority Interest
Income from Affiliates
Other Non-Cash Charges
(Increase) / Decrease in NWC
Cash Flow from Operations
Capital Expenditures
Free Cash Flow
Debt Issuance / (Repayments):
Straight Debt
Convertible Debt
Revolver
Debt Issuance / (Repayments)

Cash Flow from Operations per Share

Free Cash Flow per Share

12/10/20147:41 AM
Page 6

Company Name
Financing Assumptions
Amortization / (Issuance)
Straight Debt 1
Straight Debt 2
Straight Debt 3
Straight Debt 4
Straight Debt 5
Convertible Debt
Total Debt Amortization / (Issuance)

2003

Straight Preferred Stock

Convertible Preferred Stock
Common Equity
Equity Repurchases / (Issuance)

2004
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2005
0.0
0.0
0.0
0.0
0.0
0.0
0.0

Projected
2006
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2007
0.0
0.0
0.0
0.0
0.0
0.0
0.0

2008
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

Debt / Preferred Balances

Straight Debt 1
Straight Debt 2
Straight Debt 3
Straight Debt 4
Straight Debt 5
Revolver
Total Straight Debt
Convertible Debt
Total Debt

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!

Straight Preferred Stock

Convertible Preferred Stock
Common Equity (excludes R/E)
Total Book Equity

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0
0.0
0.0
0.0

Total Book Capital

0.0

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

12/10/20147:41 AM
Page 7

Company Name
Depreciation & Amortization Schedule
Book Depreciation
Existing PP&E
Capital Expenditures (2004-2008):
2004
2005
2006
2007
2008
Total Book Depreciation

Amount
0.0
0.0
0.0
0.0
0.0

Tax Depreciation
Existing PP&E

Basis
#DIV/0!

Capital Expenditures (2004-2008):

2004
2005
2006
2007
2008
Total Tax Depreciation

Amount
0.0
0.0
0.0
0.0
0.0

Excess of Tax over Book Depreciation

Increase (Decrease) in Deferred Taxes
Amortization of Existing Intangible Assets
Tax
Book
Excess of Tax over Book Amortization
Increase in Deferred Taxes

Life
15 yrs
40 yrs

2004
0.0

2005
0.0

0.0

0.0
0.0

0.0

Projected
2006
0.0

2007
0.0

2008
0.0

0.0
0.0
0.0

0.0
0.0
0.0
0.0

0.0

0.0

0.0

0.0
0.0
0.0
0.0
0.0
0.0

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

0.0

0.0
0.0

0.0
0.0
0.0

0.0
0.0
0.0
0.0

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

0.0
0.0
0.0
0.0
0.0
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
#DIV/0!

12/10/20147:41 AM
Page 8

Company Name
Summary Ratios

Income Statement
EBITDA / Revenues
EBIT / Revenues
Return on Revenues

2001
#DIV/0!
#DIV/0!
#DIV/0!

2002
#DIV/0!
#DIV/0!
#DIV/0!

2003
#DIV/0!
#DIV/0!
#DIV/0!

2004
#DIV/0!
#DIV/0!
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!

EBITDA / Interest Expense

EBIT / Interest Expense

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

Return on Average Equity

Return on Average Assets
Return on Average (Debt+Equity) Capital
Balance Sheet
Total Debt / Book Capitalization
Total Debt / Book Equity

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

Total Debt / EBITDA

Tangible Book Value per Share

#DIV/0!
$0.00

#DIV/0!
$0.00

#DIV/0!
$0.00

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!

12/10/20147:41 AM
Page 9

Company Name
Cost of Capital and Terminal Value Assumptions
Cost of Capital Assumptions
Risk Free Rate
Geometric Risk Premium
Stock Price
Equity Market Value ($MM)
Current Debt / Mkt Equity

0.0%
0.0%
$0.00
$0
#DIV/0!

Effective Tax Rate

0.0%

Cost of Debt (Kd):

Pre-Tax Kd
After-Tax Kd

0.0%
0.0%

Beta Calculations:
Levered
Unlevered

0.00
#DIV/0!

Unlevered Ke

#DIV/0!

Note: Relevered betas calculated each year in model

Terminal Value Assumptions
Method of Estimation
(1=Multiple;2=Perpetuity)

Perpetuity Growth Rate

0.0%

EBITDA Multiple

0.0 x

P/E Multiple

0.0 x

Debt Tax Shield Growth Rate

(APV Method)

0.0%

Note: We recommend that users run sensitivity analyses

on terminal value assumptions

12/10/20147:41 AM
Page 10

Company Name
Diccounted Cash Flow Analysis
WACC Method

2004
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

Depreciation
Amortization
Deferred Taxes
Minority Interest
Income from Affiliates
Other Non-Cash Items
Changes in Net Working Capital

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

Cash Flow from Operations

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

0.0
0.0

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Unlevered Free Cash Flows

Net Income
Interest Expense
Tax Effect of Interest Expense
After Tax Interest Expense

Now

NOPAT

Capital Expenditures
Other
Unlevered Free Cash Flow
Terminal Value (EBITDA Multiple)
Cash Flows to Capital Providers
Valuation
Firm Value (end of the year)
Plus: Excess Cash
Less: Debt Outstanding
Less: Minority Interest
Less: Preferred Stock
Equity Value (end of the year)
Price per Share
WACC Calculation
Debt/Market Equity
Relevered Beta
Ke
WACC

0.0
0.0
0.0
0.0
0.0
0.0
$0.00

0.0%
0.00
0.0%
0.0%

12/10/20147:41 AM
Page 11

Company Name
Disounted Cash Flow Analysis
Equity Residual Method

Residual Cash Flows

Net Income
Depreciation
Amortization
Deferred Taxes
Minority Interest
Income from Affiliates
Other Non-Cash Items
Changes in Net Working Capital

2004
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

2005
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

Projected
2006
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

2007
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

2008
#DIV/0!
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

#DIV/0!

0.0
#DIV/0!
0.0
0.0
0.0

0.0
#DIV/0!
0.0
0.0
0.0

0.0
#DIV/0!
0.0
0.0
0.0

0.0
#DIV/0!
0.0
0.0
0.0

0.0
#DIV/0!
0.0
0.0
0.0

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
0.0
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

0.0
$0.00

0.0
$0.00

0.0
#DIV/0!

0.0
#DIV/0!

0.0
#DIV/0!

0.0
#DIV/0!

0.0
0.0
0.0
0.0
#DIV/0!

0.0
0.0
0.0
0.0
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

#DIV/0!
#DIV/0!
#DIV/0!

Now

Cash Flow from Operations

Capital Expenditures
Change in Debt
Change in Preferred
Preferred Dividends (includes convertible)
Other
Residual Cash Flows
Terminal Value (P/E Multiple)
Cash Flows to Common Equity Holders
Valuation
Equity Value (end of the year)
Price per Share
Plus: Debt Outstanding
Plus: Minority Interest
Plus: Preferred Stock
Less: Excess Cash
Firm Value (end of the year)
Cost of Equity Calculation
Debt/Market Equity
Relevered Beta
Ke

12/10/20147:41 AM
Page 12

Company Name
Discounted Cash Flow Analysis
Adjusted Present Value Method

2004
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2005
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Projected
2006
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2007
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

2008
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!

Depreciation
Amortization
Deferred Taxes
Minority Interest
Income from Affiliates
Other Non-Cash Items
Changes in Net Working Capital
Cash Flow from Operations

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

Capital Expenditures
Other
Unlevered Free Cash Flow
Terminal Value (EBITDA Multiple)
Cash Flows to Capital Providers

0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
0.0
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

0.0
0.0
0.0
#DIV/0!
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!

Unlevered Free Cash Flows

Net Income
Interest Expense
Tax Effect of Interest Expense
After Tax Interest Expense
NOPAT

Valuation
Unlevered Free Cash Flows
Debt Tax Shield
Firm Value (end of the year)
Plus: Excess Cash
Less: Debt Outstanding
Less: Minority Interest
Less: Preferred Stock
Equity Value (end of the year)
Price per Share

Now
0.0
#DIV/0!

0.0
0.0
#DIV/0!
0.0
0.0
0.0
0.0
#DIV/0!
#DIV/0!

12/10/20147:41 AM
Page 13

ABC & XYZ

Merger Scenario - Purchase Accounting
(100% Stock)
Transaction Assumptions
Target Name
Acquiror Name

ABC
XYZ

% Cash (input % for all transaction types)

0.0%

Current Valuation
Price per Share
Merger Price
Implied Premium
Exchange Ratio

ABC
$0.00
$0.00
#DIV/0!
#DIV/0!

XYZ
$0.00

1.0
0.0
1.0

0.0

2003
$0.00
#DIV/0!
First Call

2004E
#DIV/0!
$0.00
1/1/1998

2003 Financial Data (in $MM)

Revenues
EBITDA
EBIT
Net Income to Common

ABC
0.0
0.0
0.0
0.0

XYZ
0.0
0.0
0.0
0.0

Existing Goodwill Amortization

Total Cash & Equivalents
Excess Cash
Goodwill
Total Assets
Total Debt
Preferred Equity
Common Equity

0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0

Shares Outstanding (in millions)

Options / SARs / Converts
Total Post-Deal Shares
Refinance Target Debt (1=yes;2=no)

0.0

Refinancing Rate:
YTM on 10-Year Treasuries
Spread
Refinancing Rate:

0.0%
0.0%
0.0%

Current Weighted Average Cost of Debt

(Interest Expense / Debt Balance)

#DIV/0!

Effective Tax Rate

#DIV/0!

Base Year for Combination

Note: Combination model excludes effect of transaction expenses

(i.e., legal, banking, accounting fees)

2003

Earnings per Share (basic)

ABC
XYZ
Source of Projections

2005E
#DIV/0!
$0.00

No Entry
0.0
0.0
0.0
0.0
0.0
0.0
0.0

12/10/20147:41 AM
Page 14

ABC & XYZ

Transaction Adjustments
Pro Forma Net Income (diluted)
XYZ's Net Income
ABC's Net Income
Unadjusted Combined

2003
0.0
0.0
0.0

2004E
0.0
#DIV/0!
#DIV/0!

2005E
0.0
#DIV/0!
#DIV/0!

Goodwill Created
Cost of Equity Acquired
Plus: Liabilities Assumed
Less: Excess Cash

0.0
0.0
0.0

Total Consideration
Less: Adjusted Value of Assets
Less: Identified Intangible Assets

0.0
0.0
0.0

Goodwill Created in Transaction

0.0

Transaction Adjustments
Identifiable Intangible Assets Amortization
New Interest Expense
Refinancing Adjustments
Assumed Combination Synergies
Pre-Tax Adjustments
Income Taxes on Adjustments
After-Tax Adjustments

0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!
#DIV/0!

0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!
#DIV/0!

0.0
#DIV/0!
#DIV/0!
0.0
#DIV/0!
#DIV/0!
#DIV/0!

Adjusted Net Income

Pro Forma E.P.S

#DIV/0!
#DIV/0!

#DIV/0!
$0.00

#DIV/0!
$0.00

Pro Forma Earnings Impact

XYZ's Stand-Alone EPS
NewCo's Combined EPS

2003
#DIV/0!
#DIV/0!

2004E
$0.00
#REF!

2005E
$0.00
#REF!

2003 Contribution Analysis

Revenues
EBITDA

ABC
#DIV/0!
#DIV/0!

XYZ
#DIV/0!
#DIV/0!

Accretion / (Dilution)

#DIV/0!

#REF!

#REF!

NewCo Shares
% Ownership

#DIV/0!
#DIV/0!

0.0
#DIV/0!

Additional Pre-tax Synergies

Required for No Dilution

#DIV/0!

#REF!

#REF!

Intabgible Assets Amortization Period

40.0

Adjusted Asset Value

Total Assets
Less: Goodwill
Less: Excess Cash
Plus: Assumed Asset Write Up
Adjusted Value of Assets

0.0
0.0
0.0
0.0
0.0

Summary Outputs

12/10/20147:41 AM
Page 15