Value Merge

Copyright 2003 by Robert F. Bruner.

Prepared by Mark Miles and Baocheng Yang under the direction of Robert F. Bruner.
This model gives a template for DCF valuation of a target and buyer firm. The model also
estimates EPS dilution/accretion for the buyer. To use the model, enter assumption values
indicated in blue. Please see Chapter 9, "Valuing Firms" of Applied Mergers and
Acquisitions by Robert Bruner for a discussion of this analysis. To use the model, please
follow the instructions in the "Contents" page.
This software was prepared solely for non-commercial educational purposes as a supplement to the book, Applied Mergers and
Acquisitions , by Robert F. Bruner. While it has been reviewed with care, and to the best of the author's knowledge performs as
described in the book, the publisherand author do not represent that this software is error-free, and cannot be accountable for
errors or omissions, nor for any liability arising from uses of this software.
ALL WARRANTIES, EXPRESS AND IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY,AND FITNESS FOR A
PARTICULAR PURPOSE,ARE HEREBY DISCLAIMED. NEITHER THE AUTHOR OR PUBLISHER SHALL BE LIABLE OR
RESPONSIBLE FOR ANY LOSS, INJURY, CLAIM, LIABILITY, DAMAGE OR EXPENSE OF ANY KIND OR NATURE CAUSED
BY ORARISING IN CONNECTION WITH THE USE OF THIS SOFTWARE, INCLUDING BUT NOT LIMITED TO DEFECTS IN
THE MEDIUM,OR ERRORS, OMISSIONS, OR INACCURACIES IN THE DATA PRODUCED BY THIS SOFTWARE. IF FOR
ANY REASON, BY OPERATION OF LAW OR OTHERWISE, ANY PORTION OF THE FOREGOING LIMITATION OF LIABILITY
SHALL BE VOID OR OTHERWISE UNENFORCEABLE, THEN, IN SUCH EVENT, THE MAXIMUM LIABILITY OF THE
PUBLISHER OR AUTHOR, IF ANY, SHALL BE NOT EXCEED THE TOTAL AMOUNT ACTUALLY PAID TO THE PUBLISHER
BY THE USER FOR THE SOFTWARE.
This software isintended for use as an educational tool,and notas a substitute for legal, financial or other professional or expert
advice. Use by the reader of this software constitutes assent to the terms of use and disclaimer of liability.
The model intentionally incorporates "circular reference." Do not be alarmed if you are
warned by Microsoft Excel about a circular reference. Simply set your software to "iterate"
so that it produces estimates that are internally consistent--go to Tools/Options/Calculation
and check "Iteration" and insert a number that you believe will be sufficient (50 iterations
should do.) Prepared by Professor Robert F. Bruner, http://faculty.darden.edu/brunerb/.
Contents Instructions
TAB 1: "Financials" Row BLUE cells are inputs
Operating Assumptions 4 Fill all of these in
Income Statement 42
Balance Sheet 70 RED cells are toggles
Statement of Cash Flows 104 Change these to run different scenarios
Financing Assumptions 136
Depreciation & Amortization Schedule 170 BLACK cells are calculations
Summary Ratios 203 Do not input numbers in these
TAB 2: "Valuation" Row Model is set on automatic calculation, 100 iterations
Cost of Capital 4 No need for user to change settings
Terminal Value 27
WACC Method 47 Target financial data in "merger scenario" tab is linked
Equity Residual 89 to "financials" tab. To run scenarios, user must
Adjusted Present Value 130 input acquiror's financial data in specified blue cells
TAB 3: "Merger Scenario" Row
Assumptions 5
Transaction Adjustments 34
Summary Outputs 56
For addition explanation, see appendix to Chapter 9, Applied Mergers and Acquisitions by Robert F. Bruner.
Company Name
Assumptions Note: "#DIV/0!" likely indicates the needs to enter data somewhere in the model.
Projected
Operating Assumptions 2001 2002 2003 2004 2005 2006 2007 2008
Revenue Growth #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
COGS (Excl Depr) / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
SG&A / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Exp (Income) / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Effective Tax Rate #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest / Pre-tax Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income from Affiliates / Pre-tax Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Wgtd Average Shares Outstanding (000) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000
Common Dividends per Share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Minimum Cash Balance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Days in Receivables #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Days in Inventory #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Days in Payables #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Assets / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Liabilities / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures (excl Acquisitions) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Depreciation, Amortization, & Other Years x Declining Financing Assumptions Coupon
Existing Intangible Book Amortization 40 yrs 1.0 x Straight Debt 1 0.0%
Existing Intangible Tax Amortization 15 yrs 1.0 x Straight Debt 2 0.0%
Straight Debt 3 0.0%
Existing PPE Book Depreciation 5 yrs 1.0 x Straight Debt 4 0.0%
Existing PPE Tax Depreciation 4 yrs 1.0 x Straight Debt 5 0.0%
Future CapEx Book Depreciation 20 yrs 1.0 x
Future CapEx Tax Depreciation 7 yrs 2.0 x Straight Preferred Stock 0.0% Strike Price Shares (000)
Convertible Preferred Stock 0.0% $0.00 0
Balance Sheet Shares Outstanding (000) 1,000 Convertible Debt 0.0% $0.00 0
Options / SARs Outstanding (000) 1,000 Int. Rate on Excess Cash 4.0%
Average Strike Price $0.00 Use of Excess Cash Flow 1
(1=Build Cash; 2=Repay Debt)
Interest Rate on Revolver 0.0%
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Company Name
Income Statement
Projected
2001 2002 2003 2004 2005 2006 2007 2008
Revenues $0.0 $0.0 $0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
COGS (excluding Depreciation) 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Selling, General, & Administrative 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBITDA 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Intangibles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other Expense (Income) 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBIT 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Interest (Income) 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Interest Expense - Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Expense - Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Interest Expense - Revolver 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Pre-Tax Income 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income Taxes 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
(Income) from Affilitates 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Net Income 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Straight Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income to Common 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Earnings per Share:
Basic NM NM NM #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Fully Diluted NM NM NM #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Balance Sheet
Projected
2001 2002 2003 2004 2005 2006 2007 2008
Cash and Equivalents 0.0 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Accounts Receivable 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Inventory 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Assets 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Current Assets 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Property , Plant, & Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Accumulated Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Property, Plant, & Equipment 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Intangible assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Goodwill 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity in Income of Affiliates 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Long-Term Assets 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Assets 0.0 0.0 0.0 #DIV/0! 0.0 #DIV/0! #DIV/0! #DIV/0!
Accounts Payable 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Current Liabilities (excl. S/T Debt) 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Current Liabilities 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Revolver #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Debt 0.0 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Deferred Taxes 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest 0.0 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Long-Term Liabilities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Liabilities 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Common Stock (Par + APIC+ Other Equity) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Retained Earnings 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Liabilities & Stockholders' Equity 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
#DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Statement of Cash Flows
Projected
2002 2003 2004 2005 2006 2007 2008
Net Income 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Depreciation 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amortization of Intangible 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Increase in Deferred Taxes 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income from Affiliates 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Cash Charges 0.0 0.0 0.0 0.0 0.0 0.0 0.0
(Increase) / Decrease in NWC 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow from Operations 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Free Cash Flow 0.0 0.0 #DIV/0! 0.0 #DIV/0! #DIV/0! #DIV/0!
Debt Issuance / (Repayments):
Straight Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Revolver #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Debt Issuance / (Repayments) 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Straight Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Common Stock Dividends 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity Issuance / (Repurchases) 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Change in Cash and Equivalents 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Beginning Cash and Equivalents 0.0 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Ending Cash and Equivalents 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow from Operations per Share $0.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Free Cash Flow per Share $0.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Financing Assumptions
Projected
Amortization / (Issuance) 2003 2004 2005 2006 2007 2008
Straight Debt 1 0.0 0.0 0.0 0.0 0.0
Straight Debt 2 0.0 0.0 0.0 0.0 0.0
Straight Debt 3 0.0 0.0 0.0 0.0 0.0
Straight Debt 4 0.0 0.0 0.0 0.0 0.0
Straight Debt 5 0.0 0.0 0.0 0.0 0.0
Convertible Debt 0.0 0.0 0.0 0.0 0.0
Total Debt Amortization / (Issuance) 0.0 0.0 0.0 0.0 0.0
Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0
Common Equity 0.0 0.0 0.0 0.0 0.0
Equity Repurchases / (Issuance) 0.0 0.0 0.0 0.0 0.0
Debt / Preferred Balances
Straight Debt 1 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 2 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 3 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 4 0.0 0.0 0.0 0.0 0.0 0.0
Straight Debt 5 0.0 0.0 0.0 0.0 0.0 0.0
Revolver 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Straight Debt 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Convertible Debt 0.0 0.0 0.0 0.0 0.0 0.0
Total Debt 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Straight Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Convertible Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Common Equity (excludes R/E) 0.0 0.0 0.0 0.0 0.0 0.0
Total Book Equity 0.0 0.0 0.0 0.0 0.0 0.0
Total Book Capital 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Depreciation & Amortization Schedule
Projected
Book Depreciation 2004 2005 2006 2007 2008
Existing PP&E 0.0 0.0 0.0 0.0 0.0
Capital Expenditures (2004-2008): Amount
2004 0.0 0.0 0.0 0.0 0.0 0.0
2005 0.0 0.0 0.0 0.0 0.0
2006 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0
2008 0.0 0.0
Total Book Depreciation 0.0 0.0 0.0 0.0 0.0
Tax Depreciation Basis
Existing PP&E #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures (2004-2008): Amount
2004 0.0 0.0 0.0 0.0 0.0 0.0
2005 0.0 0.0 0.0 0.0 0.0
2006 0.0 0.0 0.0 0.0
2007 0.0 0.0 0.0
2008 0.0 0.0
Total Tax Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Excess of Tax over Book Depreciation #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Increase (Decrease) in Deferred Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Amortization of Existing Intangible Assets Life
Tax 15 yrs 0.0 0.0 0.0 0.0 0.0
Book 40 yrs 0.0 0.0 0.0 0.0 0.0
Excess of Tax over Book Amortization 0.0 0.0 0.0 0.0 0.0
Increase in Deferred Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Summary Ratios
Projected
Income Statement 2001 2002 2003 2004 2005 2006 2007 2008
EBITDA / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBIT / Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Return on Revenues #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBITDA / Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBIT / Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Return on Average Equity #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Return on Average Assets #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Return on Average (Debt+Equity) Capital #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Balance Sheet
Total Debt / Book Capitalization #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Debt / Book Equity #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Total Debt / EBITDA #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Tangible Book Value per Share $0.00 $0.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Cost of Capital and Terminal Value Assumptions
Cost of Capital Assumptions
Risk Free Rate 0.0%
Geometric Risk Premium 0.0%
Stock Price $0.00
Equity Market Value ($MM) $0
Current Debt / Mkt Equity #DIV/0!
Effective Tax Rate 0.0%
Cost of Debt (Kd):
Pre-Tax Kd 0.0%
After-Tax Kd 0.0%
Beta Calculations:
Levered 0.00
Unlevered #DIV/0!
Unlevered Ke #DIV/0!
Note: Relevered betas calculated each year in model
Terminal Value Assumptions
Method of Estimation 1
(1=Multiple;2=Perpetuity)
Perpetuity Growth Rate 0.0%
EBITDA Multiple 0.0 x
P/E Multiple 0.0 x
Debt Tax Shield Growth Rate 0.0%
(APV Method)
Note: We recommend that users run sensitivity analyses
on terminal value assumptions
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Company Name
Diccounted Cash Flow Analysis
WACC Method
Projected
Unlevered Free Cash Flows Now 2004 2005 2006 2007 2008
Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Tax Effect of Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
After Tax Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
NOPAT #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Depreciation 0.0 0.0 0.0 0.0 0.0
Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income from Affiliates #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow from Operations #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0
Unlevered Free Cash Flow #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Terminal Value (EBITDA Multiple) 0.0 0.0 0.0 0.0 #DIV/0!
Cash Flows to Capital Providers #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.0
Valuation
Firm Value (end of the year) 0.0 0.0 0.0 0.0 0.0 0.0
Plus: Excess Cash 0.0 0.0 0.0 0.0 0.0 0.0
Less: Debt Outstanding 0.0 0.0 0.0 0.0 0.0 0.0
Less: Minority Interest 0.0 0.0 0.0 0.0 0.0 0.0
Less: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Equity Value (end of the year) 0.0 0.0 0.0 0.0 0.0 0.0
Price per Share $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
WACC Calculation
Debt/Market Equity #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.0%
Relevered Beta #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.00
Ke #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.0%
WACC #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.0%
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Company Name
Disounted Cash Flow Analysis
Equity Residual Method
Projected
Residual Cash Flows Now 2004 2005 2006 2007 2008
Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Depreciation 0.0 0.0 0.0 0.0 0.0
Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income from Affiliates #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow from Operations #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures 0.0 0.0 0.0 0.0 0.0
Change in Debt #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Change in Preferred 0.0 0.0 0.0 0.0 0.0
Preferred Dividends (includes convertible) 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0
Residual Cash Flows #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Terminal Value (P/E Multiple) 0.0 0.0 0.0 0.0 #DIV/0!
Cash Flows to Common Equity Holders #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Valuation
Equity Value (end of the year) 0.0 0.0 0.0 0.0 0.0 0.0
Price per Share $0.00 $0.00 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Plus: Debt Outstanding 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Plus: Minority Interest 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Plus: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Less: Excess Cash 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Firm Value (end of the year) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cost of Equity Calculation
Debt/Market Equity #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Relevered Beta #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Ke #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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Company Name
Discounted Cash Flow Analysis
Adjusted Present Value Method
Projected
Unlevered Free Cash Flows Now 2004 2005 2006 2007 2008
Net Income #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Interest Expense 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Tax Effect of Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
After Tax Interest Expense #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
NOPAT #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Depreciation 0.0 0.0 0.0 0.0 0.0
Amortization 0.0 0.0 0.0 0.0 0.0
Deferred Taxes #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Minority Interest #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Income from Affiliates #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Other Non-Cash Items 0.0 0.0 0.0 0.0 0.0
Changes in Net Working Capital #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Cash Flow from Operations #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Capital Expenditures 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0
Unlevered Free Cash Flow #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Terminal Value (EBITDA Multiple) 0.0 0.0 0.0 0.0 #DIV/0!
Cash Flows to Capital Providers #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Valuation
Unlevered Free Cash Flows 0.0 0.0 0.0 0.0 0.0 0.0
Debt Tax Shield 0.0 0.0 0.0 0.0 0.0 0.0
Firm Value (end of the year) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! 0.0
Plus: Excess Cash 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Less: Debt Outstanding 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Less: Minority Interest 0.0 0.0 #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Less: Preferred Stock 0.0 0.0 0.0 0.0 0.0 0.0
Equity Value (end of the year) #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Price per Share #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
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ABC & XYZ
Merger Scenario - Purchase Accounting
(100% Stock)
Transaction Assumptions Current Valuation ABC XYZ
Target Name ABC Price per Share $0.00 $0.00
Acquiror Name XYZ Merger Price $0.00
Implied Premium #DIV/0!
Exchange Ratio #DIV/0!
% Cash (input % for all transaction types) 0.0%
Shares Outstanding (in millions) 1.0 0.0
Options / SARs / Converts 0.0
Total Post-Deal Shares 1.0 0.0
Refinance Target Debt (1=yes;2=no) 1
Earnings per Share (basic) 2003 2004E 2005E
Refinancing Rate: ABC $0.00 #DIV/0! #DIV/0!
YTM on 10-Year Treasuries 0.0% XYZ #DIV/0! $0.00 $0.00
Spread 0.0% Source of Projections First Call 1/1/1998
Refinancing Rate: 0.0%
2003 Financial Data (in $MM) ABC XYZ
Current Weighted Average Cost of Debt #DIV/0! Revenues 0.0 0.0
(Interest Expense / Debt Balance) EBITDA 0.0 0.0
EBIT 0.0 0.0
Effective Tax Rate #DIV/0! Net Income to Common 0.0 0.0
Base Year for Combination 2003 Existing Goodwill Amortization 0.0 No Entry
Total Cash & Equivalents 0.0 0.0
Excess Cash 0.0 0.0
Note: Combination model excludes effect of transaction expenses Goodwill 0.0 0.0
(i.e., legal, banking, accounting fees) Total Assets 0.0 0.0
Total Debt 0.0 0.0
Preferred Equity 0.0 0.0
Common Equity 0.0 0.0
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ABC & XYZ
Transaction Adjustments
Goodwill Created
Pro Forma Net Income (diluted) 2003 2004E 2005E Cost of Equity Acquired 0.0
XYZ's Net Income 0.0 0.0 0.0 Plus: Liabilities Assumed 0.0
ABC's Net Income 0.0 #DIV/0! #DIV/0! Less: Excess Cash 0.0
Unadjusted Combined 0.0 #DIV/0! #DIV/0!
Total Consideration 0.0
Transaction Adjustments Less: Adjusted Value of Assets 0.0
Identifiable Intangible Assets Amortization 0.0 0.0 0.0 Less: Identified Intangible Assets 0.0
New Interest Expense #DIV/0! #DIV/0! #DIV/0!
Refinancing Adjustments #DIV/0! #DIV/0! #DIV/0! Goodwill Created in Transaction 0.0
Assumed Combination Synergies 0.0 0.0 0.0
Pre-Tax Adjustments #DIV/0! #DIV/0! #DIV/0! Intabgible Assets Amortization Period 40.0
Income Taxes on Adjustments #DIV/0! #DIV/0! #DIV/0!
After-Tax Adjustments #DIV/0! #DIV/0! #DIV/0! Adjusted Asset Value
Total Assets 0.0
Adjusted Net Income #DIV/0! #DIV/0! #DIV/0! Less: Goodwill 0.0
Pro Forma E.P.S #DIV/0! $0.00 $0.00 Less: Excess Cash 0.0
Plus: Assumed Asset Write Up 0.0
Adjusted Value of Assets 0.0
Summary Outputs
Pro Forma Earnings Impact 2003 2004E 2005E 2003 Contribution Analysis ABC XYZ
XYZ's Stand-Alone EPS #DIV/0! $0.00 $0.00 Revenues #DIV/0! #DIV/0!
NewCo's Combined EPS #DIV/0! #REF! #REF! EBITDA #DIV/0! #DIV/0!
Accretion / (Dilution) #DIV/0! #REF! #REF! NewCo Shares #DIV/0! 0.0
% Ownership #DIV/0! #DIV/0!
Additional Pre-tax Synergies
Required for No Dilution #DIV/0! #REF! #REF!
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