Finance - Valuation Project
Overview: For this project, you are going to put to use the valuation tools you have been practicing over the summer. That is, you are going to build a valuation model for a company of your choice. When selecting your company, please choose a publicly-traded US firm that is NOT in the banking, insurance or oil &gas Industries. Additionally, please do not choose to value a Real Estate Investment Trust (REIT). No two people may value the same company. In valuing your company, you may use data from anywhere you can find it, including Capital IQ.
Please select a company and email Kelley (copy me) with your choice. She will be keeping a log of who is valuing which company. She can also notify you if you need to make another selection.
Required Assignment: Calculate an estimate of your firm's stock price. At a minimum, your model should include:
A calculation of the fully-diluted shares outstanding using the Treasury Stock Method (TSM).
A five-year projection of your company's free cash flows (FCF). Your forecast assumptions should be based off of your reading of background material related to your company.
Valuation estimates using "comparable firm analysis" and "precedent transactions analysis"
A valuation estimate based using a discounted cash flow (DCF) analysis. This should include:
- A sophisticated calculation of your company's weighted average cost of capital (WACC)
- Terminal Value estimates using the discounted cash flow (DCF) method and exit multiple method (EMM).
- Data tables to show the sensitivity of your stock price estimate to changes in the terminal growth assumptions
Build a valuation summary table and football field graph to present your estimated values.
Extra Credit -
Provide a fully projected (for 5 years) Three-Statement model that is linked and dynamic (i.e. project for 5 years the income statements, balance sheets and cash flow statements and link them)
Extra Credit -
Build a full LBO model for a hypothetical Leveraged Buyout of your company. Assume that the transaction takes place on the fiscal year (FY) end closing date. You should assume that the transaction was financed with the following debt schedule: (Note - you will need to do the first extra credit part to do this, since you will need to link the financial statements).
- Revolving Credit Facility - Equal to 10% of the transaction value at LIBOR + 250 bps, with a 0.15% commitment fee on the unused portion, 5 year maturity, zero drawdown at close.
- Term Loan B1 Facility - Equal to 30% of the transaction value at LIBOR + 225 bps, 1.5% amortization, 6-year maturity.
- Term Loan B2 Facility - Equal to 25% of the transaction value at LIBOR + 250 bps, 1.0% amortization, 7-year maturity
- Senior Subordinated Notes - Equal to 20% of the transaction value at LIBOR + 325 bps, 7-year maturity.
In addition to the debt schedule, assume the following:
- The deal will involve a 20% premium over FY End closing stock price.
- Advisory Fees are estimated to be 0.05% of the transaction amount.
- Financing Fees are estimated to be 0.1% of the transaction amount.
- Legal & Misc. Fees are estimated to be 0.02% of the transaction amount.
- Financing fees can be amortized over 5 years.
- PP&E write-up of 10% with a depreciation period of 8 years.
- 20% of Allocable Purchase Premium to Intangibles with a 5-year amortization of the intangible write-up amount.
I will look for several components when I grade this part of the assignment: An accurate debt structure, debt schedule, equity component and returns analysis (cash return and IRR). Please note for me any assumptions you make.
Attachment:- Assignment Files.rar