Forecasted Free Cash Flows
price $ XXXXXXXXXX Additional Assumptions
variable cost per unit 35.0% Equity Capitalization 40%
fixed cost per year $ 400,000 Rf 2.00%
initial investment $ 2,000,000 Rm 8.43%
salvage value - 0 Cost of Debt 6%
useful life 5.00
depreciation exp/yr. $ 400,000
cannibalization $ (100,000)
tax rate 22.0%
Cost of capital
Years
0 1 2 3 4 5
Meals 40,000 60,000 80,000 100,000 120,000
Revenue 800,000 1,200,000 1,600,000 2,000,000 2,400,000
Cost of Goods Sold 280,000 420,000 560,000 700,000 840,000
Gross Margin 520,000 780,000 1,040,000 1,300,000 1,560,000
Operating Expense 400,000 400,000 400,000 400,000 400,000
Depreciation Exp 400,000 400,000 400,000 400,000 400,000
Pre-tax Profit (EBIT) (280,000) (20,000) 240,000 500,000 760,000
Taxes 61,600 4,400 (52,800) (110,000) (167,200)
After-tax Profit (NOPAT) (218,400) (15,600) 187,200 390,000 592,800
Depreciation Exp 400,000 400,000 400,000 400,000 400,000
Operating Cash Flow 181,600 384,400 587,200 790,000 992,800
Cannibalization (100,000) (100,000) (100,000) (100,000) (100,000)
Net Working Capital (100,000) (50,000) (75,000) (75,000) (75,000) 375,000
Investment - Plant and Equip (2,000,000)
Opportunity Cost - land (456,000)
Free Cash Flows (2,556,000) 31,600 209,400 412,200 615,000 1,267,800
Salvage / Terminal value 6,000,000
FCF & Salvage or Terminal Value (2,556,000) 31,600 209,400 412,200 615,000 7,267,800
(2,556,000) 31,600 209,400 412,200 615,000 7,267,800
Net Present Value (Enterprise Value) 5,980,000
Land Opportunity Cost
Sales Price 500,000
BV 300,000
Gain/(Loss) 200,000
Tax Effect (22%) (44,000)
Net CF 456,000
Working Capital 100,000 150,000 225,000 300,000 375,000 450,000
(50,000) (75,000) (75,000) (75,000) (75,000)
Comparables
# Company Name Last Price Shares Outstanding Market Capitalization LTM Net Debt Total Enterprise Value LTM Revenue LTM EBITDA LTM EPS
1
2
3
4
5
Mean ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0!
Median ERROR:#NUM! ERROR:#NUM! ERROR:#NUM! ERROR:#NUM! ERROR:#NUM! ERROR:#NUM!
# Company Name EV / Revenue EV / EBITDA Price / EPS EBITDA Margin Beta Unlev. Beta
1 ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0!
2 ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0!
3 ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0!
4
5
Mean ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0!
Median ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#DIV/0! ERROR:#NUM! ERROR:#DIV/0!
UMN 6230 Content Fall 2021 Restaurant with WACC
1
Restaurant Problem Continued (1/1)
• Using the prior solution for the restaurant case you need to update your assumption
on the cost of capital using a market rate vs. the rate simply provided to you
historically
• You have been provided assumptions on the risk-free rate, the market return and
some basic capital structure assumptions
• However, given your company is private – you will need to pull together some
comparables to help identify the appropriate cost of capital
• Please select five comparables to your restaurant company and complete the
comparables tab in the spreadsheet
– You will need to research your comparables data from available sources from the
Carlson Li
ary, Yahoo Finance, etc.
– Your comparables should make be reasonable and related to your project
• Compute your cost of capital and finalize your Enterprise Value