CASH FLOW STATEMENT

A
Year
Income Statement
Sales
Cost of Goods Sold
Interest payments on debt
Interest earned on cash and marketable securities
Depreciation
Profit before tax
Taxes @ 40%
Profit After Tax
Dividends @ 40%
Retained Earnings

B
0

1000
500
32
6.4
100
374.4
149.76
224.4
90
134.4

1100
550
32
9.450975
80.85
446.601
179
267.601
107.3266
160.2744

Balance Sheet
Cash and Marketable securities
Current Assets
Fixed Assets
At Cost
Depreciation
Net Fixed Assets
Total Assets

80
150

156.2744
165

1070
300
770
1000

1227.85
380.85
847
1168.274

Current Liabilities
Debt
Stock
Accumulated Retained Earnings
Total Liabilities and Equity

80
320
450
150
1000

88
320
450
310.2744
1168.274

Assumption: the firm expects its sales to grow at a rate of 10% per year.
Year
0
Free Cash Flow Calculation
Profit After Tax
ADD: Depreciation
SUBTRACT: Increase in Current Assets
ADD: Increase in Current Liabilities
SUBTRACT: Increase in Fixed Assets at Cost
ADD: After Tax Interest on Debt
SUBTRACT: After Tax Interest on Cash & Marketable Securities

Cash Flow Statement

Year
Cash Flow from operating activities
Profit after tax

1
267.601
80.85
-15
8
-157.85
19.2
-5.67059
197.1304

1
267.601

ADD: Depreciation
Adjust for changes in net working capital:
Subtract: Increase in current assets
Add: Increase in current liabilities
Net Cash from operating activities

80.85
-15
8
341.451

Cash flow from investing activities

Acquisitions of fixed assets - capital expenditure
Purchase of investment securities
Proceeds from sales of investment securities
Net Cash used in investing activities

-157.85
0
0
-157.85

Cash flow from financing activities

Net proceeds from borrowing activities
Net proceeds from stock issue, repurchase
dividend paid
Net cash from financing activities

0
0
-107.327
-107.327

Net increase in cash and cash equivalents

Check: Changes in cash and mkt. securities

76.27438
76.27438

nges in Cash Balances from the consolidated statement of cash flows in fact match those in the project balance sheet of the proforma mo

Valueing the Firm

Weighted Average Cost of Capital
Long term Free Cash Flow Growth Rate

20%
5%

Year
Free Cash Flow
Terminal Value
Total

Enterprise Value, Present Value of FCF (row 79)

Add: Initial Cash & Marketable Securities Balance at Year 0
Asset Value in Year 0
Subtract: Value of Firm Debt
Equity Value

Rs. 1,508.03
Rs. 80.00
Rs. 1,588.03
-Rs. 320.00
Rs. 1,268.03

1
197.13
197.13

Sensitivity Analysis
0%
2%
4%
6%
8%

Rs. 1,268.03
1232.807412
1245.696655
1258.422804
1267.334429
1271.602187

140000%
120000%
100000%

10%
12%
14%
16%
18%
20%
22%
24%
26%
28%

1268.027638
1263.32317
1250.215368
1232.399751
1205.681438
1173.58646
1129.985938
1077.011669
1017.292352
943.97263

MENT
2

1210
605
32
15.99454272
88.935
500.0595427
200
300.0595427
120.3447364
179.7148063

1331
665.5
32
23.45012
97.8285
559.1216
224
335.1216
134.4071
200.7146

1464.1
732.05
32
31.90927
107.6114
624.3479
250
374.3479
150.1395
224.2084

1610.51
805.255
32
41.48503887
118.372485
696.3675539
279
417.3675539
167.393404
249.9741499

243.5891873
181.5

342.6637 455.0681
199.65
219.615

582.0578849
241.5765

1401.485
469.785
931.7
1356.789187

1592.484 1802.582
567.6135 675.2249
1024.87 1127.357
1567.184 1802.04

2033.690035
793.597335
1240.0927
2063.727085

96.8
320
450
489.9891872
1356.789187

106.48
117.128
320
320
450
450
690.7037 914.9121
1567.184 1802.04

128.8408
320
450
1164.886271
2063.727071

300.0595427
88.935
-16.5
8.8
-173.635
19.2
-9.59672563
217.2628171

335.1216
97.8285
-18.15
9.68
-190.999
19.2
-14.0701
238.6115

300.0595427

374.3479 417.3675539
107.6114 118.372485
-19.965
-21.9615
10.648
11.7128
-210.098 -231.108185
19.2
19.2
-19.1456 -24.89102332
262.5984 288.6921305

335.1216 374.3479

5
417.3675539

SALES GROWTH
CURRENT ASSET/SALES
CURRENT LIABILITIES/SALES
NET FIXED ASSETS/SALES
COST OF GOODS SOLD/SALES
DEPRECIATION RATE
INTEREST RATE ON DEBT
INTEREST Earned ON CASH AND SECURITIES
TAX RATE
DIVIDEND PAYOUT RATIO

88.935

107.6114

118.372485

-18.15
-19.965
9.68
10.648
424.4801 472.6423

-21.9615
11.7128
525.4913389

-173.635
0
0
-173.635

-190.999
0
0
-190.999

-210.098
0
0
-210.098

-231.108185
0
0
-231.108185

0
0
-120.3447364
-120.3447364

0
0
-134.407
-134.407

0
0
-150.14
-150.14

0
0
-167.393404
-167.393404

87.31480633
87.31480644

99.07455 112.4044
99.07455 112.4044

-16.5
8.8
381.2945427

97.8285

126.9897499
126.9897603

t balance sheet of the proforma model.

Inflation Rate

3%

Real Growth

2
217.26

3
238.61

4
262.60

217.26

238.61

262.60

2%

5
288.69
Rs. 2,020.84
Rs. 2,309.54

Growth

140000%
120000%
100000%
80000%
Series1

1268
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
22%
24%

80000%
Series1
60000%

Series2

40000%
20000%
0%
1

9 10 11 12 13 14 15

26%
28%
30%
32%

10%
15%
8%
77%
50%
10%
10%
8%
40%
40%

WACC
2%
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA

4%
6%
8%
10%
12%
14%
16%
18%
2485.286 2273.501 2083.063 1911.437 1756.428 1616.135 1488.901 1373.286
NA
2273.501 2083.063 1911.437 1756.428 1616.135 1488.901 1373.286
NA
NA
2083.063 1911.437 1756.428 1616.135 1488.901 1373.286
NA
NA
NA
1911.437 1756.428 1616.135 1488.901 1373.286
NA
NA
NA
NA
1756.428 1616.135 1488.901 1373.286
NA
NA
NA
NA
NA
1616.135 1488.901 1373.286
NA
NA
NA
NA
NA
NA
1488.901 1373.286
NA
NA
NA
NA
NA
NA
NA
1373.286
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

20%
1268.028
1268.028
1268.028
1268.028
1268.028
1268.028
1268.028
1268.028
1268.028
NA
NA
NA

22%
1172.022
1172.022
1172.022
1172.022
1172.022
1172.022
1172.022
1172.022
1172.022
1172.022
NA
NA

24%
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
1084.298
NA

26%
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003
1004.003

28%
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829
930.3829

30%
862.773
862.773
862.773
862.773
862.773
862.773
862.773
862.773
862.773
862.773
862.773
862.773

32%
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834
800.5834

34%
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909
743.2909

36%
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304
690.4304

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

NA
NA
NA
NA

930.3829
NA
NA
NA

862.773
862.773
NA
NA

800.5834
800.5834
800.5834
NA

743.2909
743.2909
743.2909
743.2909

690.4304
690.4304
690.4304
690.4304

38%
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875
641.5875

641.5875
641.5875
641.5875
641.5875

ASIAN PAINTS: How Financial Model Work?

Year

0
2012-13
Income Statement
(in Crores)
Sales
11075.03
Cost of Goods Sold/Expenses
9238.8
Interest payments on debt (Finance Cost)
36.04
Interest earned on cash and marketable securities (Finance Income) 10.23
Depreciation
154.6
Profit before tax
1655.21
Taxes @ 30.9%
511.45989
Profit After Tax
1143.75011
Dividends
515.52
Retained Earnings
628.23011
Balance Sheet
Cash and Marketable securities
Current Assets
Fixed Assets
At Cost
Depreciation
Net Fixed Assets
Total Assets
Current Liabilities
Debt
Stock
Accumulated Retained Earnings
Total Liabilities and Equity

Year
Free Cash Flow Calculation
Profit After Tax
ADD: Depreciation
SUBTRACT: Increase in Current Assets
ADD: Increase in Current Liabilities
SUBTRACT: Increase in Fixed Assets at Cost
ADD: After Tax Interest on Debt
SUBTRACT: After Tax Interest on Cash & Marketable Securities

Valueing the Firm

Weighted Average Cost of Capital

1473.86
2909.36
3385.14
979.4
2405.74
6788.96
2931.41
312.49
256.69
3288.37
6788.96

9.35%

Long term Free Cash Flow Growth Rate

8.00%

Year
Free Cash Flow
Terminal Value
Total

Enterprise Value, Present Value of FCF

Add: Initial Cash & Marketable Securities Balance at Year 0
Asset Value in Year 0
Subtract: Value of Firm Debt
Equity Value
No. of Outstanding Shares
Value per Share as per Model
Market Value as on 31/03/2013

(in Crores)
13278.96097
11037.55362
36.04
10.37738643
774.4724064
1441.272333
562
879.2723331
396.3125067
482.9598264

15921.4742
13186.51663
36.04
11.0853733
935.9368106
1774.066135
692
1082.066135
487.7173162
594.348819

19089.84757
15753.87327
36.04
12.48440661
1118.15958
2194.25913
856
1338.25913
603.1906276
735.0685024

22888.72724
18821.08292
36.04
14.52686465
1335.860319
2710.270865
1057
1653.270865
745.1751819
908.095683

1516.328613
3437.044297

1677.862645
4060.437175

1919.452609
4796.89775

2266.386049
5666.93364

4701.813276
1753.872406
2947.94087
7901.31378

6211.701174
2689.809217
3521.891957
9260.191778

8015.557586
3807.968797
4207.588789
10923.93915

10170.61689
5143.829117
5026.787771
12960.10746

3560.803954
312.49
256.69
3771.329826
7901.31378

4325.333132
312.49
256.69
4365.678645
9260.191778

5254.012
312.49
256.69
5100.747148
10923.93915

6382.08463
312.49
256.69
6008.842831
12960.10746

879.2723331
774.4724064
-527.6842972
629.3939537
-1316.673276
21.624
6.226431855
466.6315518

1082.066135
935.9368106
-623.3928783
764.5291784
-1509.887898
21.624
-6.651223978
664.2241245

1338.25913
1118.15958
-736.4605746
928.6788683
-1803.856413
21.624
-7.490643966
858.9139473

1653.270865
1335.860319
-870.0358903
1128.072629
-2155.059301
21.624
-8.716118792
1105.016503

Inflation Rate

7.00%

1
466.63

2
664.22

3
858.91

4
1105.02

466.63

664.22

858.91

1105.02

Rs. 75,749.53
Rs. 1,473.86
Rs. 77,223.39
Rs. 312.49
Rs. 76,910.90
Rs. 9.95
Rs. 7,729.74
Rs. 4,917.25

undervalued, u should buy

27443.58396
22485.46476
36.04
17.41063716
1595.946432
3343.543401
1304
2039.543401
919.2789624
1120.264439

Assumptions
SALES GROWTH
CURRENT ASSET/SALES
CURRENT LIABILITIES/SALES
NET FIXED ASSETS/SALES
COST OF GOODS SOLD/SALES
DEPRECIATION RATE
INTEREST RATE ON DEBT
INTEREST Earned ON CASH AND SECURITIES
TAX RATE
DIVIDEND PAYOUT RATIO
CURRENT ASSET/SALES
CURRENT LIABILITIES/SALES
NET FIXED ASSETS/SALES
COST OF GOODS SOLD/SALES
Dividend Payout Ratio

2750.396295
6694.772029
12745.25673
6739.775549
6005.481182
15450.64951
7752.362236
312.49
256.69
7129.10727
15450.64951

5
2039.543401
1595.946432
-1027.838389
1370.277606
-2574.639843
21.624
-10.4463823
1414.466826

Rm
Beta

16%
0.47189

Real Growth
5
1414.47
Rs. 113,242.37
114656.83

1%

Tax Rate
Rf
Tax Adjusted Rf
CAPM
Tax Adjusted CAPM
Weight of Equity
Weight of Debt
Cost of Equity
Cost of Debt

30.90%
8.94%
6.26%
9.38%
6.69%
45.10%
54.90%
6.69%
11.53%

91 day T-Bill

0
19.90%
26.27%
26.47%
21.72%
83.42%
28.93%
11.53%
0.69%
30.90%
45.07%
CAGR
-1.47%
1.31%
2.20%
-0.36%

1
19.90%
25.88%
26.82%
22.20%
83.12%
28.93%
11.53%
0.69%
30.90%
45.07%

2
19.90%
25.50%
27.17%
22.12%
82.82%
28.93%
11.53%
0.69%
30.90%
45.07%

3
19.90%
25.13%
27.52%
22.04%
82.52%
28.93%
11.53%
0.69%
30.90%
45.07%

4
19.90%
24.76%
27.88%
21.96%
82.23%
28.93%
11.53%
0.69%
30.90%
45.07%

5
19.90%
24.39%
28.25%
21.88%
81.93%
28.93%
11.53%
0.69%
30.90%
45.07%

Date
2-Jan-91
1-Jan-92
4-Jan-93
3-Jan-94
2-Jan-95
1-Jan-96
1-Jan-97
1-Jan-98
1-Jan-99
3-Jan-00
1-Jan-01
1-Jan-02
1-Jan-03
1-Jan-04
3-Jan-05
2-Jan-06
2-Jan-07
1-Jan-08
1-Jan-09
4-Jan-10
3-Jan-11
2-Jan-12
1-Jan-13

Close
318.95
572.82
744.92
1083.74
1182.14
908.01
939.55
1081.2
890.8
1592.2
1254.3
1055.3
1100.15
1912.25
2115
2835.95
4007.4
6144.35
3033.45
5232.2
6157.6
4636.75
5950.85

79.60%
30.04%
45.48%
9.08%
-23.19%
3.47%
15.08%
-17.61%
78.74%
-21.22%
-15.87%
4.25%
73.82%
10.60%
34.09%
41.31%
53.33%
-50.63%
72.48%
17.69%
-24.70%
28.34%

Rm
20.19%
Rf
Tax Adjusted Rf
CAPM
Tax Adjusted CAPM
Weight of Equity
Weight of Debt

91 day T-Bill
8.94%
6.26%
14.25%
12.83%

Beta
0.47189

Tax Rate
30%