Technical Finance Prep Answers

7/28/2019 Technical Finance Prep Answers

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Integrated Financial Statement Exercise

Cash Flow Statement Exercise (Answer)

Balance Sheet Income Statement 1/1/08-12/31/08 Cash Flow Statement12/31/07 12/31/08

ASSETS Net Revenues 1,340.30 Net IncomeCash and equivalents 34.60 364.30 Cost of Goods Sold (COGS) 432.40 Depreciation and am

Accounts Receivable 74.80 82.40 Selling, general, & Administrative 123.40 Changes in workingInventories 132.60 145.70 Research and development 56.30 Accounts ReceivTotal Current Assets 242.00 592.40 Depreciation & Amortization 1 20.00 Inventories

Other operating expenses 12.30 Accounts payablPP&E 212.70 259.30 Net Interest expense 45.60 Deferred taxes (botIntangibles 34.20 42.50 Pretax income 650.30 Cash from operationDeferred Taxes 12.60 34.60 Income tax expense (35%) 227.61Other Long Term Assets 123.90 145.30 Net income 422.70 Capital expenditureTotal Assets 625.40 1,074.10 Dividends 2 31.40 Purchases of intang

1 Footnote in 10K reveals that amortization expense was $ Increases in all othe2 Assume all dividends were cash dividends Cash from investing

LIABILITIESB.A.S.E Calculations Increase in Notes P

Accounts payable 120.50 130.50 Beginning PP&E 212.70 Increase in long termNotes payable 23.50 34.20 Add: Capital Expenditures 61.60 Increase in preferred sCurrent portion of long-term debt 49.60 68.40 Sub: Depreciation 15.00 Increase in commonCurrent Liabilities 193.60 233.10 Ending PP&E 259.30 Increase in APIC (a

Increase in TreasuryLong-term debt 214.00 214.00 Beginning Intangibles 34.20 DividendsDeferred taxes 43.50 52.30 Add: Purchases of Intangibles 13.30 Cash from financingTotal Liabilities 451.10 499.40 Sub: Amortization 5.00

Ending Intangibles 42.50 Beginning cash balanceShareholder's equity Total change in cashPreferred Stock 12.40 13.50 Ending cash balanceCommon Stock par value 5.60 7.40

Additional paid-in-capital 146.40 163.50Treasury Stock (112.30) (123.20)Retained Earnings 122.20 513.50Total liabilities and SE 625.40 1,074.10


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Discounted Cash Flow Analysis for Com

Basic Exercise

Free cash flows for year ending December 31:Valuation date: 1/1/2008

1,359.11,509.01,689.71,961.42,237.6

38,784.710%

Assumptions for Basic ExampleCurrent Share Price $45.00Fully Diluted Shares Outstanding 510.0 Net Debt 2,750.0WACC 10%

Questions:1.Estimate the present value of the projected FCF discounted at the stated WACC Discount th2.Calculate XYZs implied enterprise value3.Calculate XYZs equity value4.Derive fair value per share5. According to the DCF valuation method, are XYZs shares overvalued or undervalued?

Basic Exercise (Answer)1. PV of FCF Periods 1 1,235.6

2 1,247.13 1,269.54 1,339.65 1,389.4

2. Enterprise Value PV of Terminal Value 24,082.2Sum of PV of FCF and Terminal Value 30,563.4

3. Equity Value Net Debt 2,750.0Equity value 27,813.4

4. Equity value per share Fully Diluted Shares 510.0Equity value per share $54.54

5. Overvalued / Undervalued? Current Share Price $45.00DCF Equity value per share $54.54Difference ($9.54)

Answer: Undervalued

Advanced Exercise (Answer)

2012Terminal value in 2012Weighted average cost of capital

2008200920102011


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Free cash flow buildupProjected

Year 12/31/08 12/31/09Period 1 2Total Revenues 6,600.0 7,326.0EBITDA 2,431.0 2,698.4EBIT 2,046.0 2,271.1Tax rate 40.0% 40.0%EBIAT 1,227.6 1,362.6Depreciation & Amortization 385.0 427.4

Accounts receivable (150.0) (181.5)Inventories (15.4) (55.3)Prepaid expenses (5.0) (6.1)Other current assets (20.0) (24.2)

Accounts payable 16.9 60.9 Accrued expenses 10.0 12.1Other current liabilities 130.0 157.3Deferred tax (liabilities) 0.0 0.0Capital expenditures (220.0) (244.2)Unlevered free cash flows 1,359.1 1,509.0

Discount Rate (WACC) 10% 10%Present value of free cash flows 1,235.6 1,247.1

Sum of present values of FCFs 6,481.2

Terminal value

Growth in perpetuity methodLong term growth rate 4.0%Free cash flow (t+1) 2,327.1Terminal value 38,784.7Present value of terminal value 24,082.2

Enterprise value to Equity valueEnterprise value 30,563.4Less: Net Debt 2,750.0Equity Value 27,813.4Fully Diluted Shares Outstanding 510.0Equity Value per share $54.54


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any XYZ

terminal value back to the present


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12/31/10 12/31/11 12/31/123 4 5

8,205.1 9,271.8 10,477.13,022.2 3,507.8 4,000.02,543.6 2,967.0 3,388.8

40.0% 40.0% 40.0%1,526.2 1,780.2 2,033.3

478.6 540.9 611.2(219.8) (266.7) (301.3)

(96.9) (116.1) (126.6)(7.3) (8.9) (10.0)

(29.3) (35.6) (40.2)106.6 127.7 139.3

14.7 17.8 20.1190.5 231.1 261.2

0.0 0.0 0.0(273.5) (309.1) (349.2)

1,689.7 1,961.4 2,237.610% 10% 10%

1,269.5 1,339.6 1,389.4


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WACC Analysis for Company XYZ

WACC - Basic WACCWACC Assumptions Total Capital

Share Price $45.00 DebtShares Outstanding 510.0 EquityDebt 2,750.0 TotalCost of Debt 5.2% Cost of CapitTax Rate 40% Cost of DebtCost of Equity 15% Tax Rate

After-Tax Cos

Cost of Equity

Capital WeigDebt Weightin

Equity Weight

WACC =

WACC - Advanced (Answer)Analysis of WACC

Cost of debt Capital structureCost of debt 5.2% Current capiMarginal tax rate 40.0% Market valueCost of debt after tax shield 3.1% Net debt 2,750.0

Equity 22,950.0Cost of equity Total 25,700.0Risk-Free Rate (rf) 4.7%Market Risk Premium (rm-rf) 6.0% Weighted average cost of Raw (observed) beta 0.79 Weighted average cost of cCost of equity using industry beta 9.1% Weighted average cost of cCost of equity using raw beta 9.5%

Industry beta calculation

Comps Raw beta Share price Shares Market cap.Company XYZ 0.79 $45.00 510.0 22,950.0Company A 0.85 $30.00 200.0 6,000.0Company B 0.78 $40.00 500.0 20,000.0Company C 0.75 $145.00 600.0 87,000.0

135,950.0


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- Basic (Answer)

2,750.0 22,950.0 25,700.0

al5.2%40%

t of Debt 3.1%

15%

htingg 10.7%

ing 89.3%

13.7%

tal structure Target capital structure% Weight override % Weight

10.7% 10.7%

89.3% 89.3%

capitalpital: raw 8.8%pital: industry 8.5%

Debt D / E Tax rate Unl. Beta Weigh. BetaRelev.Beta

2,750.0 11.98% 40.00% 0.74 0.122,800.0 46.67% 40.00% 0.66 0.035,600.0 28.00% 40.00% 0.67 0.10

17,950.0 20.63% 40.00% 0.67 0.43Average: 0.68 0.68 0.73


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Leveraged Buyout Analysis for Company XYCurrent Year 2007Exit Year 2012

LBO Assumptions

2007 DataCurrent Share Price $45.00Fully Diluted Shares Outstanding 510.0 Net Debt 2,750.0 Enterprise Value 25,700.0 LTM EBITDA 2,150.0 EV / EBITDA 12.0xDebt Capacity (Net debt/EBITDA) 5.0x

2012 DataEBITDA 4,000.0 Net Debt Outstanding 9,750.0

EBITDA multiple in exit year 12.0xRequired Equity Return 25%

Periods 5

Questions:1.What is the implied Enterprise Value in the exit year?2.What is the implied Equity Value at the exit year?3.What is the initial Equity Value required by the sponsors?

Answers:1. 48,000.0 2. 38,250.0 3. 12,533.8

Questions:1.What is the initial implied Enterprise Value (the total funds raised for buying oldco debt and equity)?2.What is the highest purchase price the sponsors would be willing to pay for CVS shares today?3.Given CVS market trading level, is an LBO likely?

Answers:1. 23,283.8 2. $40.263. No Deal


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Z


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M&A Analysis for Company XYZM&A Assumptions Acuirer TargetShare Price $25.00 $45.00EPS next year $1.50 $2.28Wtd. Avg. Shares Outstanding 1,000.0 500.0

Basic ExerciseAssumptions

No premium is offered above target's current share price.

Acquirer Target Pro forma

Share price at announcement $25.00 $45.00P/E ratio 16.7x 19.7xEPS Next year $1.50 $2.28Shares outstanding 1,000.0 500.0Net income next year

Acquirer shares issuedOffer value (offer price/share x target shares out.)Exchange ratio (acquirer shares issued/target shares out.)

Accretion/Dilution ($ per share) Accretion/Dilution (%)

Basic Exercise (Answer)Assumptions

No premium is offered above target's current share price.

Acquirer Target Pro forma

Share price at announcement $25.00 $45.00P/E ratio 16.7x 19.7xEPS Next year $1.50 $2.28 $1.39Shares outstanding 1,000.0 500.0 1,900.0Net income next year 1,500.0 1,140.6 2,640.6

Acquirer shares issued 900.0Offer value (offer price/share x target shares out.) 22,500.0Exchange ratio (acquirer shares issued/target shares out.) 1.8x

Acquirer purchases 100% of target by issuing additional stock topurchase target shares.

Acquirer purchases 100% of target by issuing additional stock topurchase target shares.


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Accretion/Dilution ($ per share) ($0.11) Accretion/Dilution (%) -7.35%


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Advanced Exercise (Answer)Assumptions1. Acquirer purchases 100% of target Inputs2. A 20% premium is offered above target's current share price Premium3. The acquisition is paid for via 50% debt and 50% stock Consideration4. Interest rate on new debt is 5% Interest Exp.5. Financing fees on debt are 0% Financing Fees6. Useful life of debt is 0 years Useful Life Debt

7. PP&E write-up of $20,000 has a useful life of 20 years PP&E Write Up8. Intangibles write-up of $5,000 has a useful life of 10 years Intangibles Write Up9. Goodwill of $10,000 is created Goodwill10. Pre-tax synergies of $1,000 Synergies11. Acquiror's Tax Rate is 40% Tax Rate

Deal InformationOffer Price $54.00Offer value (offer price/share x target shares out.) 27,000.0

Acquirer shares issued 540.0Exchange ratio (acquirer shares issued/target shares out.) 1.08xDebt Issued 13,500.0

Accretion/Dilution Acquirer Target Pro formaShare price at announcement $25.00 $45.00P/E ratio 16.7x 19.7x

EPS Next year $1.50 $2.28Shares outstanding 1,000.0 500.0Net income (pre adjustments) 1,500.0 1,140.6 2,640.6

Adjustments:Plus: Planned Synergies 1,000.0Less: Addtl. Interest Expense (675.0)Less: Addtl. Depreciation (1,000.0)

Less: Amort. of ID'd Intangibles (500.0)Total Pretax Adjustments (Taxable) (1,175.0)Tax Impact of adjustments at acquirer's 40% tax rate 470.0

Total Adjustments (705.0)

Pro Forma Net Income (post adjustments) 1,935.6Diluted Shares Outstanding 1,540.0Pro Forma EPS $1.26


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Accretion/Dilution -- per share ($0.24) Accretion/Dilution -- % (16.2%)


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20%50% stock

5%

$20,000 20 years$5,000 10 years

$10,000$1,000

40%


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Trading Comps Analysis for Company XY

Trading ComparablesCompany A Company B Comp

2007 2008 E 2007 2008 E 2007

Share Price $30.00 $40.00 $145.00Fully Diluted Shares Outstanding 200.0 500.0 600.0

Income StatementRevenues 2,000.0 2,200.0 5,000.0 5,600.0 20,000.0 COGS 800.0 880.0 1,900.0 2,128.0 7,200.0 SG&A 440.0 484.0 1,100.0 1,232.0 4,400.0 D&A 200.0 220.0 500.0 560.0 2,000.0 EBIT 560.0 616.0 1,500.0 1,680.0 6,400.0 Interest 150.0 140.0 220.0 180.0 300.0 Pre-Tax Income 410.0 476.0 1,280.0 1,500.0 6,100.0 Taxes 164.0 190.4 512.0 600.0 2,440.0 Net Income 246.0 285.6 768.0 900.0 3,660.0 Wtd. Avg. Diluted Shares 180.0 180.0 450.0 450.0 540.0 Diluted EPS $1.37 $1.59 $1.71 $2.00 $6.78

Income statement assumptionsRevenue growth (%) 10.0% 12.0%Gross profit margin (%) 60.0% 60.0% 62.0% 62.0% 64.0%SG&A margin (% sales) 22.0% 22.0% 22.0% 22.0% 22.0%Effective tax rate (%) 40.0% 40.0% 40.0% 40.0% 40.0%D&A (% sales) 10.0% 10.0% 10.0% 10.0% 10.0%

Balance SheetCash and equivalents 1,000.0 500.0 3,500.0

Accounts receivable 350.0 1,200.0 2,850.0Inventories 850.0 1,400.0 6,000.0Prepaid expenses 100.0 200.0 2,600.0Other current assets 50.0 150.0 2,550.0PP&E 2,500.0 5,000.0 10,000.0Goodwill 1,850.0 4,000.0 4,350.0Intangibles 650.0 400.0 3,150.0Other non-current assets 1,000.0 1,500.0 3,500.0Total Assets 8,350.0 14,350.0 38,500.0

Accounts payable 950.0 600.0 2,400.0 Accrued expenses 75.0 125.0 2,575.0Other current liabilities 500.0 250.0 2,000.0Short Term Debt (Revolver) 850.0 1,350.0 3,350.0Current portion of debt 600.0 750.0 3,100.0Long term debt 2,350.0 4,000.0 15,000.0Deferred income taxes 150.0 100.0 500.0


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Other non-current liabilities 850.0 450.0 2,000.0Total Liabilities 6,325.0 7,625.0 30,925.0

Minority interest 400.0 1,000.0 2,000.0Preferred stock 250.0 0.0 1,500.0Retained earnings 1,375.0 5,725.0 4,075.0

Total Shareholders' Equity 2,025.0 6,725.0 7,575.0

Total Liabilities + Equity 8,350.0 14,350.0 38,500.0Balance check 0.0 0.0 0.0

Exercise (Answer)

Comparables Output WorksheetLast twelve m

Share price

ar et

Cap.

nterpr se

value P/E

REVCompany A $30.00 $6,000.0 $9,450.0 22.0x 4.7xCompany B 40.00 20,000.0 26,600.0 23.4x 5.3xCompany C 145.00 87,000.0 108,450.0 21.4x 5.4xTargetCompany XYZ $45.00 $22,950.0 $25,700.0 21.3x 4.3x

Median 21.7x 5.0xMean 22.0x 4.9x

Last twelve mShares out. Net Debt EPS REV

Company XYZ 510.0 $2,750.0 $2.11 6,000.0

Mean Valuation- Price per Share $46.51 $52.70High $53.65Low $44.24

Current price $45.00


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any C2008 E

22,400.0 8,064.0 4,928.0 2,240.0 7,168.0

280.0 6,888.0 2,755.2 4,132.8

540.0 $7.65

12.0%64.0%22.0%40.0%10.0%


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onths (LTM) Year 1

EBIT

EBITDA P/E

REV

EBIT

EBITDA16.9x 12.4x 18.9x 4.3x 15.3x 11.3x17.7x 13.3x 20.0x 4.8x 15.8x 11.9x16.9x 12.9x 18.9x 4.8x 15.1x 11.5x

14.3x 12.0x 19.7x 3.9x 12.6x 10.6x

16.9x 12.7x 19.3x 4.5x 15.2x 11.4x16.5x 12.6x 19.4x 4.4x 14.7x 11.3x

onths (LTM) Year 1EBIT EBITDA EPS REV EBIT EBITDA

1,800.0 2,150.0 $2.28 6,600.0 2,046.0 2,431.0

$52.69 $47.93 $44.24 $52.13 $53.65 $48.56


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Transaction Comps Analysis for Company X

Transaction ComparablesCompany A Company B Comp

2007 2008 E 2007 2008 E 2007

Share Price $30.00 $40.00 $145.00Fully Diluted Shares Outstanding 200.0 500.0 600.0 Offer Premium 10% 10% 10%

Income StatementRevenues 2,000.0 2,200.0 5,000.0 5,600.0 20,000.0 COGS 800.0 880.0 1,900.0 2,128.0 7,200.0 SG&A 440.0 484.0 1,100.0 1,232.0 4,400.0 D&A 200.0 220.0 500.0 560.0 2,000.0 EBIT 560.0 616.0 1,500.0 1,680.0 6,400.0 Interest 150.0 140.0 220.0 180.0 300.0 Pre-Tax Income 410.0 476.0 1,280.0 1,500.0 6,100.0 Taxes 164.0 190.4 512.0 600.0 2,440.0 Net Income 246.0 285.6 768.0 900.0 3,660.0 Wtd. Avg. Diluted Shares 180.0 180.0 450.0 450.0 540.0 Diluted EPS $1.37 $1.59 $1.71 $2.00 $6.78

Income statement assumptionsRevenue growth (%) 10% 12%Gross profit margin (%) 60% 60% 62% 62% 64%SG&A margin (% sales) 22% 22% 22% 22% 22%Effective tax rate (%) 40% 40% 40% 40% 40%

D&A (% sales) 10% 10% 10% 10% 10%

Balance SheetCash and equivalents 1,000.0 500.0 3,500.0

Accounts receivable 350.0 1,200.0 2,850.0Inventories 850.0 1,400.0 6,000.0Prepaid expenses 100.0 200.0 2,600.0Other current assets 50.0 150.0 2,550.0PP&E 2,500.0 5,000.0 10,000.0Goodwill 1,850.0 4,000.0 4,350.0Intangibles 650.0 400.0 3,150.0Other non-current assets 1,000.0 1,500.0 3,500.0Total Assets 8,350.0 14,350.0 38,500.0

Accounts payable 950.0 600.0 2,400.0 Accrued expenses 75.0 125.0 2,575.0Other current liabilities 500.0 250.0 2,000.0Short Term Debt (Revolver) 850.0 1,350.0 3,350.0Current portion of debt 600.0 750.0 3,100.0Long term debt 2,350.0 4,000.0 15,000.0


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Deferred income taxes 150.0 100.0 500.0Other non-current liabilities 850.0 450.0 2,000.0

Total Liabilities 6,325.0 7,625.0 30,925.0

Minority interest 400.0 1,000.0 2,000.0Preferred stock 250.0 0.0 1,500.0

Retained earnings 1,375.0 5,725.0 4,075.0Total Shareholders' Equity 2,025.0 6,725.0 7,575.0

Total Liabilities + Equity 8,350.0 14,350.0 38,500.0Balance check 0.0 0.0 0.0

Exercise (Answer)Comparables Output Worksheet

Acquirer Target

Announce

date

Effective

date Offer Value

Transaction

valueCompany D Company A 11/3/2006 2/27/2007 $6,600.0 $10,050.0Company E Company B 2/8/2006 3/31/2006 22,000.0 28,600.0Company F Company C 11/23/2005 3/1/2006 95,700.0 117,150.0

MedianMean

Shares out. Net DebtCompany XYZ 510.0 $2,750.0

Mean Valuation- Offer Price per ShareHighLow

Current priceImplied Premium


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Z

any C2008 E

22,400.0 8,064.0 4,928.0 2,240.0 7,168.0

280.0 6,888.0 2,755.2 4,132.8

540.0 $7.65

12%64%22%40%

10%


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Last twelve months (LTM) Year 1TV /

REV

TV /

EBIT

TV /

EBITDA

TV /

REV

TV /

EBIT

TV /

EBITDA5.0x 17.9x 13.2x 4.6x 16.3x 12.0x5.7x 19.1x 14.3x 5.1x 17.0x 12.8x5.9x 18.3x 13.9x 5.2x 16.3x 12.5x

5.7x 18.3x 13.9x 5.1x 16.3x 12.5x5.5x 18.4x 13.8x 5.0x 16.6x 12.4x

Last twelve months (LTM) Year 1

REV EBIT EBITDA REV EBIT EBITDA6,000.0 1,800.0 2,150.0 6,600.0 2,046.0 2,431.0

$59.72 $59.69 $52.88 $58.90 $61.05 $53.78$61.05$52.88$45.00

33% 33% 18% 31% 36% 20%


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Company XYZCurrent Market InfoCurrent share price $45.00Current date 1/1/08Basic Shares Outstanding (in millions) 500.0

Income StatementProjected Annual F

Year 2007 2008 2009 2010Period 1 2 3Total Revenues 6,000.0 6,600.0 7,326.0 8,205.1Cost of goods sold 2,600.0 2,640.0 2,783.9 3,035.9SG&A 1,600.0 1,914.0 2,271.1 2,625.6Operating profit - EBIT 1,800.0 2,046.0 2,271.1 2,543.6Interest expense 150.0 145.0 111.3 105.0Pretax income - EBT 1,650.0 1,901.0 2,159.8 2,438.6

Taxes 594.0 760.4 863.9 975.4Net Income 1,056.0 1,140.6 1,295.9 1,463.2Weighted Avg. Diluted Shares 500.0 500.0 500.0 500.0Diluted EPS $2.11 $2.28 $2.59 $2.93

Pro Forma EBITDAEBIT 1,800.0 2,046.0 2,271.1 2,543.6Depreciation & amortization 350.0 385.0 427.4 478.6EBITDA 2,150.0 2,431.0 2,698.4 3,022.2Income statement assumptionsRevenue growth (%) 10.0% 11.0% 12.0%Gross profit margin (%) 57% 60.0% 62.0% 63.0%EBIT margin (%) 30% 31.0% 31.0% 31.0%Effective tax rate (%) 36% 40.0% 40.0% 40.0%D&A growth (%) 5.8% 5.8% 5.8%CapEx Growth (%) 10.0% 11.0% 12.0%

Supplemental cash flow statement informationCapital expenditures 220.0 244.2 273.5

Balance Sheet12/31/07 12/31/08 12/31/09 12/31/10

Cash and equivalents 1,500.0 972.1 2,164.4 3,591.0 Accounts receivable 1,500.0 1,650.0 1,831.5 2,051.3Inventories 1,000.0 1,015.4 1,070.7 1,167.7Prepaid expenses 50.0 55.0 61.1 68.4Other current assets 200.0 220.0 244.2 273.5PP&E 3,000.0 2,860.0 2,701.9 2,521.7Goodwill 2,000.0 2,000.0 2,000.0 2,000.0Intangibles 800.0 825.0 850.0 875.0Other non-current assets 150.0 150.0 150.0 150.0Total Assets 10,200.0 9,747.5 11,073.7 12,698.6

Accounts payable 1,100.0 1,116.9 1,177.8 1,284.4


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Accrued expenses 100.0 110.0 122.1 136.8Other current liabilities 1,300.0 1,430.0 1,587.3 1,777.8Short Term Debt (Revolver) 1,000.0 0.0 0.0 0.0Current portion of debt 750.0 200.0 150.0 100.0Long term debt 2,500.0 2,300.0 2,150.0 2,050.0Deferred income taxes 300.0 300.0 300.0 300.0

Other non-current liabilities 1,000.0 1,000.0 1,000.0 1,000.0Total Liabilities 8,050.0 6,456.9 6,487.2 6,648.9

Retained earnings 2,150.0 3,290.6 4,586.5 6,049.6Total Shareholders' Equity 2,150.0 3,290.6 4,586.5 6,049.6

Total Liabilities + Equity 10,200.0 9,747.5 11,073.7 12,698.6Balance check 0.0 0.0 0.0 0.0

Balance Sheet assumptions12/31/07 12/31/08 12/31/09 12/31/10

Working Capita l Asse ts

Accounts receivable (% sales) 25% 25% 25% 25%Inventories (% cogs) 38% 38% 38% 38%Prepaid expenses (% sales) 1% 1% 1% 1%Other current assets (% sales) 3% 3% 3% 3%Workin g Capita l Liabil i t ies

Accounts payable (% cogs) 42% 42% 42% 42% Accrued expenses (% sales) 2% 2% 2% 2%Other current liabilities (% sales) 22% 22% 22% 22%

B.A.S.E Calculations

Intangible assetsBeginning Intangibles 800.0 825.0 850.0

Add: Acquisition of intangibles 50.0 50.0 50.0 50.0Sub: Amortization (25.0) (25.0) (25.0) (25.0)Ending Intangibles 800.0 825.0 850.0 875.0

PP&EBeginning PP&E 3,000.0 2,860.0 2,701.9

Add: Capital expenditures 200.0 220.0 244.2 273.5Sub: Depreciation (360.0) (402.4) (453.6)Ending PP&E 3,000.0 2,860.0 2,701.9 2,521.7

Cash Flow Statement

12/31/08 12/31/09 12/31/10Net Income 1,140.6 1,295.9 1,463.2Depreciation & amortization 385.0 427.4 478.6Changes in working capital

Accounts receivable (150.0) (181.5) (219.8)Inventories (15.4) (55.3) (96.9)Prepaid expenses (5.0) (6.1) (7.3)Other current assets (20.0) (24.2) (29.3)

Accounts payable 16.9 60.9 106.6


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Accrued expenses 10.0 12.1 14.7Other current liabilities 130.0 157.3 190.5

Deferred tax liabilities 0.0 0.0 0.0Other non-current liabilities 0.0 0.0 0.0

Cash from operations 1,492.1 1,686.4 1,900.2

Capital Expenditures (220.0) (244.2) (273.5)Purchase of intangible assets (50.0) (50.0) (50.0)Other long-term assets 0.0 0.0 0.0

Cash from investing (270.0) (294.2) (323.5)

Increases / (decreases) in debt (1,750.0) (200.0) (150.0)Cash from financing (1,750.0) (200.0) (150.0)

Total increase/decrease of cash (527.9) 1,192.2 1,426.7

Debt Schedule

12/31/08 12/31/09 12/31/10DebtCash @ beginning of the year (end of last year) 1,500.0 972.1 2,164.4Plus: Free cash flows prior to debt during year % of sales 1,222.1 1,392.2 1,576.7Less: Minimum cash balance 2.0% (132.0) (146.5) (164.1)Less: Mandatory Principal Repayments (750.0) (200.0) (150.0)Less: Optional Principal Repayments 0.0 0.0 0.0Total cash available for debt paydown / (debt required) 1,840.1 2,017.8 3,426.9

Revolving Credit FacilityBeginning Balance 1,000.0 0.0 0.0Mandatory Amortization (enter as -) 0.0 0.0 0.0Optional Principal Draw (Payment) (1,000.0) 0.0 0.0Ending Balance 1,000.0 0.0 0.0 0.0Interest 5.0% 25.0 0.0 0.0

Long Term DebtBeginning Balance 2,500.0 2,300.0 2,150.0Mandatory Amortization (enter as -) (750.0) (200.0) (150.0) (100.0)Optional Principal Payment 0.0 0.0 0.0Ending Balance 2,500.0 2,300.0 2,150.0 2,050.0Interest 5.0% 120.0 111.3 105.0

Total Interest 145.0 111.3 105.0Total Debt 2,300.0 2,150.0 2,050.0


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Circuit Breaker 1 1= On

2= Off

orecast2011 2012

4 59,271.8 10,477.13,337.8 3,667.02,967.0 3,421.32,967.0 3,388.8

100.0 95.02,867.0 3,293.8

1,146.8 1,317.51,720.2 1,976.3500.0 500.0$3.44 $3.95

2,967.0 3,388.8540.9 611.2

3,507.8 4,000.0

13.0% 13.0%64.0% 65.0%32.0% 32.3%40.0% 40.0%

5.8% 5.8%13.0% 13.0%

309.1 349.2

12/31/11 12/31/125,342.4 7,373.02,317.9 2,619.31,283.8 1,410.4

77.3 87.3309.1 349.2

2,314.9 2,078.02,000.0 2,000.0

900.0 925.0150.0 150.0

14,695.4 16,992.2

1,412.2 1,551.4


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154.5 174.62,008.9 2,270.0

0.0 0.0100.0 100.0

1,950.0 1,850.0300.0 300.0

1,000.0 1,000.06,925.6 7,246.1

7,769.8 9,746.17,769.8 9,746.1

14,695.4 16,992.20.0 0.0

12/31/11 12/31/12

25% 25%38% 38%1% 1%3% 3%

42% 42%2% 2%

22% 22%

875.0 900.050.0 50.0

(25.0) (25.0)900.0 925.0

2,521.7 2,314.9309.1 349.2

(515.9) (586.2)2,314.9 2,078.0

12/31/11 12/31/121,720.2 1,976.3

540.9 611.2

(266.7) (301.3)(116.1) (126.6)

(8.9) (10.0)(35.6) (40.2)127.7 139.3


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17.8 20.1231.1 261.2

0.0 0.00.0 0.0

2,210.4 2,529.8

(309.1) (349.2)(50.0) (50.0)

0.0 0.0(359.1) (399.2)

(100.0) (100.0)(100.0) (100.0)

1,751.4 2,030.6

12/31/11 12/31/12

3,591.0 5,342.41,851.4 2,130.6(185.4) (209.5)(100.0) (100.0)

0.0 0.05,157.0 7,163.5

0.0 0.00.0 0.00.0 0.00.0 0.00.0 0.0

2,050.0 1,950.0(100.0) (100.0)

0.0 0.01,950.0 1,850.0

100.0 95.0

100.0 95.01,950.0 1,850.0

Technical Finance Prep Answers

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