Financial model for valuation of a company

Question

Problem:

This assignment requires to build a financial model for valuation of a company. Start with using historical income statements and build a ten year forecast using the information. This probably sounds easier than it is. I would suggest that you start with the unit growth (compounded) and forecast the units first. From there, you have to calculate what you will charge per unit for general revenue and guess what you want to do with Management revenue. From here, you'll need to decide what expenses are fixed and what are variable and how the forecast should be calculated. Remember that in this case that the units are driving the forecast.

	2007		2008		2009
	UNITS	PRICE	UNITS	PRICE	UNITS	PRICE
	500,000		540,000		577,800
REVENUES
Products	$25,000,000.00	$50.00	$28,080,000.00	$52.00	$30,946,968.00	$53.56
Service	$1,500,000.00	$3.00	$1,593,000.00	$2.95	$1,675,620.00	$2.90
TOTAL REVENUE	$26,500,000.00	$53.00	$29,673,000.00	$54.95	$32,622,588.00	$56.46
EXPENSES
COGS	$10,000,000.00	$20.00	$11,124,000.00	$20.60	$12,260,916.00	$21.22
Administration	$5,000,000.00	$10.00	$5,151,600.00	$9.54	$5,304,204.00	$9.18
Utilities	$200,000.00	$0.40	$205,200.00	$0.38	$213,786.00	$0.37
Rent	$500,000.00	$1.00	$513,000.00	$0.95	$531,576.00	$0.92
Depreciation	$500,000.00	$1.00	$502,200.00	$0.93	$502,686.00	$0.87
Consultants	$35,000.00	$0.07	$43,200.00	$0.08	$40,446.00	$0.07
Bad debt	$15,000.00	$0.03	$10,800.00	$0.02	$17,334.00	$0.03
TOTAL EXPENSES	$16,250,000.00	$32.50	$17,550,000.00	$32.50	$18,870,948.00	$32.66
EBIT	$10,250,000.00	$20.50	$12,123,000.00	$22.45	$13,751,640.00	$23.80
Margin	38.68%		40.86%		42.15%
EBITDA	$10,750,000.00	$21.50	$12,625,200.00	$23.38	$14,254,326.00	$24.67
Margin	40.57%		42.55%		43.69%