Professional Documents
Culture Documents
Kipley Pereles
Cait Blanton
Cassandra Phillips
Jenn Wheeler
Dan McGee
Brad Smith
Volcom’s Profile
• Industry – Apparel – Footwear and Accessories
• The Brand: Symbolized by “The Stone”
• Motto: “Youth against establishment”
• Target market:
• Primarily teens and young adults
Financial Ratios
Liquidity & Profitability
NPV Project
Planning Process
SWOT
3-Year Financial Plan
CAPM, WACC & Cost of Capital
Contractual Agreement
Ratios - Liquidity
2.69
3 Volcom
2 Industry Average
1
0
2007 2008 2009
Ratios - Profitability
Cash Flow Project
Investment Project
Increase Volcom’s retail stores
Open 5 stores on the West Coast
Cash Flow Project
Investment Overview
Initial costs: $15,000,000
Salvage value after five years: $10,000,000
Sales increase 25% every year
Cost of Goods Sold (COGS) is 50% of sales
Administrative and other expense is 30% of sales
Working Capital
Year 1: $547,200
Year 2: $729,600
Year 3: $972,800
Year 4: $1,595,734
Year 5: -$2,127,646 (recovery anticipated)
Cash Flow Project
Base Case Results
Base Case
Net Present Value (NPV) $12,861,374
Volcom, Inv.
Project Summary
Best Case Base Case Base Case Worst Case NPV = 0 NPV = 0 Tax Rate
Sales +10% PVIF=14% WACC Sales - 10%, Revenue COGS 38%
COGS - 10% PVIF=21% COGS + 10% -43% 21%
Third-party manufacturing
Weaknesses
Market competition
Threats
Third party reliance – manufacturing,
distribution, retailers
Retailer consolidation
R(f)= 3.3%
R(m)= 14%
Beta= 1.67
R(e)= Rf + (Rm-Rf)
*β
R(e)= 21.17%
Market Value of Equity
Stock Price=
$20.50
Shares
outstanding=
24,300,000
MVE=
$498,150,000
Pricing Structure
Description of Opportunity
Risk vs. Return
Current and Forecasted Economic Conditions
Markup
Summary Table:
Expected
Forecasted
Year Revenue OCF Price /
Pieces
Piece
1 18, 000,000 4,402,007 11 M $27
2 22,500,000 5,747,207 26 M $29
3 23,000,000 5,951,207 17.5 M $31
Contractual Agreement
Costs:
Operating Expense
Parts and Assets
One time Costs
3rd Party Contracts
Wind Down Services
Base Price Discounted Price
Sale Price $27
Initial Markup 23.00%
List Price $33.21
Tax 32%
Shipping and
Handling $3,375 $3,375
Shipping and Handling per Piece ordered 100 $45.00 Order Minimum
1000 $112.50
10,000 $337.50
100,000 $1,350.00
500,000 $6,750.00 Order Maximum
Termination Costs Assuming Hawiian distributer breaches contract
Questions?