M10-04-MergerValuationApplication

Model10-04MergerValuationApplication(BasedonRevenueGrowthModel10-03)BidderTargetCombinedPanelA–ValueDriversR0=Baseyearrevenues$18,500$6,000$24,500Supergrowthperiodms=Netoperatingincomemargin9.5%10.0%10.0%Ts=Taxrate35.0%30.0%35.0%gs=Growthrate7.0%6.0%7.0%ds=Depreciation5.5%5.5%5.5%Iws=Workingcapitalrequirements2.0%2.0%2.0%Ifs=Capitalexpenditures5.0%5.0%5.0%Ios=Changeinotherassetsnet0.0%0.0%0.0%ks=Costofcapital9.4%9.8%9.6%n=Numberofsupergrowthyears151515Terminalperiodmc=Netoperatingincomemargin7.1%8.0%7.5%Tc=Taxrate35.0%35.0%35.0%gc=Growthrate5.0%4.0%5.0%dc=Depreciation4.0%3.5%4.0%Iwc=Workingcapitalrequirements1.0%1.0%1.0%Ifc=Capitalexpenditures2.0%3.0%2.0%Ioc=Changeinotherassetsnet0.0%0.0%0.0%kc=Costofcapital10.0%10.0%10.0%1+h=calculationrelationship=(1+gs)/(1+ks)0.97810.96540.9763PanelB–CalculatingValuesPresentvalueofsupergrowthcashflows10,914$3,778$15,246$Presentvalueofterminalvalue15,7122,88221,086Enterpriseoperatingvalue26,626$6,660$36,332$Add:Marketablesecurities267-267Entityvalue26,893$6,660$36,599$Less:Totalinterest-bearingdebt5,9002,2008,100Equityvalue20,993$4,460$28,499$Numberofshares220133288Valuepershare95.42$33.53$98.95$