BAV Model v4.7

Courseware: #103-701

Contents

Overview and InstructionsImported Financial StatementsStandardized Financial StatementsAccounting AdjustmentsRatio AnalysisPerformance ChartsAssumptionsPro Formas and Valuation

Overview

The purpose of the Business Analysis and Valuation Model (BAV Model) is to aid users in analyzing and valuing any company with at least two years of historical financial

Paul Healy, and Victor Bernard (Cincinnatti, OH: South-Western College Publishing, 2004).

Download a PDF version of Instructions with screenshots:

Technical Note

This workbook makes extensive use of macros. For these macros to be operational, yoursecurity level must be set to 'medium', and you must select the 'enable macros' button whenthe workbook is first opened. To check/adjust your security level, select Tools| Macro|Security| Medium (level). If your security level is set to 'high', the workbook will not operatecorrectly.

To open multiple copies of the model at the same time, each copy should be opened in a newinstance of Microsoft Excel (i.e. start Excel from the Start menu, then use File|Open… to openthe model). Excel allocates a fixed amount of memory for each launch, and multiple copiesof the model can easily require more memory than allocated by a single Excel instance,resulting in 'Out of System Resources' errors.

The Business Analysis and Valuation Model was developed by Professor Paul Healy andProfessor Krishna Palepu with the assistance of Research Associate Jonathan Barnett.Development assistance was provided by Village Software, Inc.See BAV Navigator menu --> About BAV Model for software version number.

Please do not use without the authors' permission.

Copyright © 2002-2008 President and Fellows of Harvard College

statement data. This program may be used in conjunction with the Business Analysis& Valuation Using Financial Statements text, written by Professors Krishna Palepu,

Instructions links within this model require the Internet Explorer browser.

http://www.hbs.edu/it/pdf/bav_help.pdf

http://www.hbs.edu/it/pdf/bav_help.pdf

Imported Income Statement

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Company NameOrdering of Years on Financial StatementsLatest Income Statement YearEarliest Income Statement YearFiscal Year-End (Month, Day)Units

Step 2: Select Valuation Type

Classifications Year Ended , ()

PASTE IMPORTED FINANCIAL STATEMENT DATA HERE

Initial Setup

Step 1:

If you have a Compustat WRDS account

If you do not have a Compustat account, fill in the yellow cells and proceed to Step 2.

Change Sign?

PASTE FINANCIAL STATEMENT LABELS IN THIS COLUMN

Download Company Financials from Compustat WRDS

D6

Enter the year of the latest Income Statement.

D7

Enter the year of the earliest Income Statement.

F14

Income Statement Sign Changes: The BAV Model treats revenues and expenses on the Imported Income Statement as positive numbers. Yet, companies sometimes: (a) report expenses as negative numbers (e.g., -100 or (100)) to indicate that they reduce earnings, and/or (b) report Interest Income and Other Income as negative expenses. Please review the Imported Income Statement and for line items where either of these issues arise, use the 'Change Sign?' drop down menu in the adjacent cell in column F to identify the affected line item(s) with a negative sign. This will ensure that the model treats these items correctly.

Imported Income Statement

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Classifications Year Ended , () Change Sign?

F14

Income Statement Sign Changes: The BAV Model treats revenues and expenses on the Imported Income Statement as positive numbers. Yet, companies sometimes: (a) report expenses as negative numbers (e.g., -100 or (100)) to indicate that they reduce earnings, and/or (b) report Interest Income and Other Income as negative expenses. Please review the Imported Income Statement and for line items where either of these issues arise, use the 'Change Sign?' drop down menu in the adjacent cell in column F to identify the affected line item(s) with a negative sign. This will ensure that the model treats these items correctly.

Imported Balance Sheet

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Classifications #N/A 0 -1

PASTE IMPORTED FINANCIAL STATEMENT DATA HERE *

*Please import the BEGINNING balance sheet values for the years shown above.

The beginning balance sheet values for a given year are equivalent to the prior year's ENDING balance sheet values.

Change Sign?


F4

Balance Sheet Sign Changes: Firms sometimes classify assets as negative liabilities, or liabilities as negative assets. To reclassify these as positive assets or liabilities, you will need to use the 'Change Sign?' drop down menu in column F to identify the affected line item(s) with a negative sign.

Imported Balance Sheet

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Classifications #N/A 0 -1

Change Sign?

F4

Balance Sheet Sign Changes: Firms sometimes classify assets as negative liabilities, or liabilities as negative assets. To reclassify these as positive assets or liabilities, you will need to use the 'Change Sign?' drop down menu in column F to identify the affected line item(s) with a negative sign.

Imported Statement of Cash Flows

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Classifications Year Ended , ()

PASTE IMPORTED FINANCIAL STATEMENT DATA HERE

Change Sign?


F4

Statement of Cash Flow Sign Changes: The standardized Statement of Cash Flows will only be correct if the firm reports cash inflows as positive numbers, and cash outflows as negative numbers. If the firm you are analyzing does not use this format (e.g., it shows both cash/fund inflows and cash/fund outflows as positive numbers) you will need to use the 'Change Sign?' drop down menu in column F to identify which rows are cash outflows and require changes in signs.

Imported Statement of Cash Flows

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Classifications Year Ended , () Change Sign?

F4

Statement of Cash Flow Sign Changes: The standardized Statement of Cash Flows will only be correct if the firm reports cash inflows as positive numbers, and cash outflows as negative numbers. If the firm you are analyzing does not use this format (e.g., it shows both cash/fund inflows and cash/fund outflows as positive numbers) you will need to use the 'Change Sign?' drop down menu in column F to identify which rows are cash outflows and require changes in signs.

Classification Lookup

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Please select Classification category here

Directions:1. Select the financial statement (Income Statement, Balance Sheet, or Statement of Cash Flows) from the white drop-down menu below.

2. Select the desired line-item classification heading(s) from the yellow shaded drop-down menu for examples of financial statement line-items typically classified under that heading.

Classification Lookup

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Please select Classification category here

Standardized Financial Statements

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As Reported###

AssetsCash and Marketable SecuritiesAccounts ReceivableInventoryOther Current AssetsTotal Current Assets

Long-Term Tangible AssetsLong-Term Intangible AssetsOther Long-Term AssetsTotal Long-Term AssetsTotal Assets

LiabilitiesAccounts PayableShort-Term DebtOther Current LiabilitiesTotal Current Liabilities

Long-Term DebtDeferred Taxes

Total Long-Term LiabilitiesTotal Liabilities

Minority Interest

Shareholders' EquityPreferred StockCommon Shareholders' EquityTotal Shareholders' Equity

Beginning Balance Sheet

Other Long-Term Liabilities (non-interest bearing)

Total Liabilities and Shareholders' Equity

Common Shares Outstanding at Fiscal Year End

O9

Accounting Adjustments: The Accounting Adjustments shown in columns O and P are cumulative. The Adjusted Balance figures shown in columns Q and R are defined as the sum of the As Reported figure plus the Accounting Adjustment for each year.

Q9

Adjusted Balance: The Adjusted Balances reported in columns Q and R are defined as the sum of the As Reported values and the Accounting Adjustments for each year shown. Since the Accounting Adjustment figures are cumulative, the Adjusted Balance figures show what the adjusted value would be at the beginning of each year, after all accounting changes are made.


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As ReportedYear Ended , ()Income Statement

SalesCost of SalesGross ProfitSG&A

Other Operating ExpenseOperating IncomeInvestment IncomeOther Income, net of Other Expense

Other IncomeOther Expense

Net Interest Expense (Income)Interest IncomeInterest Expense

Minority InterestPre-Tax IncomeTax Expense

Net IncomePreferred DividendsNet Income to Common

Unusual Gains, Net of Unusual Losses (after tax)

Common Shares for Primary EPS Calculation


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As ReportedYear Ended , ()

Statement of Cash Flows

Net Income

Non-operating losses (gains)Long-term operating accruals Depreciation and amortization Other

Net debt (repayment) or issuance

Dividend (payments)

After-tax net interest expense (income)

Operating cash flow before working capital investments

Net (investments in) or liquidation of operating working capital

Operating cash flow before investment in long-term assets

Net (investment in) or liquidation of operating long-term assets

Free cash flow available to debt and equity

After-tax net interest expense (income)

Free cash flow available to equity

Net stock (repurchase), issuance, or other equity changes

Net increase (decrease) in cash balance

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Other Operating Expense

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BAV Identities

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#N/A

I. Net Working CapitalAccounts Receivable

+ Inventory+ Other Current Assets- Accounts Payable- Other Current Liabilities= Beginning Net Working Capital

II. Net Long-Term Assets

Long-term Tangible Assets+ Long-term Intangible Assets+ Other Long-Term Assets- Minority Interest- Deferred Taxes

-

= Beginning Net Long-Term Assets

III. Total AssetsBeginning Net Working Capital

+ Beginning Net Long-Term Assets= Beginning Net Assets

IV. Total Net Capital

Short-term Debt+ Long-term Debt- Cash= Beginning Net Debt

+ Beginning Preferred Stock+ Beginning Common Shareholders' Equity= Beginning Total Net Capital

Beginning Balance Sheet & Identities

Other Long-Term Liabilities (non-interest bearing)

BAV Identities

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Income Statement & Identities

Year Ended , ()

SalesNet Operating Profit after Tax (NOPAT):

- Net Interest Expense after Tax= Net Income- Preferred Dividends= Net Income to Common

I. Net Interest Expense after Tax

Interest Expense- Interest Income= Net Interest Expense (Income)x (1- Tax/Pre-Tax Income)= Net Interest Expense after Tax

II. Net Operating Profit after Tax (NOPAT)

Net Income+ Net Interest Expense after Tax= Net Operating Profit after Tax- Unusual Gains, Net of Unusual Losses (after tax)

= Net Operating Profitexcluding Unusual Gains,Net of Unusual Losses (after tax)

Condensed Financial Statements

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#N/A

Beginning Net Working Capital + Beginning Net Long-Term Assets = Total Assets

Beginning Net Debt+ Beginning Preferred Stock+ Beginning Shareholders' Equity

= Total Net Capital


Condensed Financial Statements

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Year Ended , () 0 1

Income Statement

SalesNet Operating Profit after Tax

- Net Interest Expense after Tax= Net Income- Preferred Stock Dividends= Net Income to Common

Operating ROAROEBV of Assets Growth RateBV of Equity Growth RateNet Operating Asset Turnover ratio

Ratio Analysis

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Please choose calculation method:

DECOMPOSING PROFITABILITY: DUPONT ALTERNATIVE

NOPAT / Salesx Sales / Net Assets= Operating ROA

Spreadx Net Financial Leverage= Financial Leverage Gain

ROE (Operating ROA + Spread * Net Financial Leverage)

EVALUATING OPERATING MANAGEMENT

Key Growth Rates:

Annual Sales Growth NA*Annual Net Income Growth NA

Key Profitability Ratios:

Sales / SalesCost of Sales / SalesGross MarginSG&A / SalesOther Operating Expense / SalesInvestment Income / SalesOther Income, net of Other Expense / SalesMinority Interest / SalesEBIT MarginNet Interest Expense (Income) / SalesPre-Tax Income MarginTaxes / SalesUnusual Gains, Net of Unusual Losses (after tax) / SalesNet Income Margin

EBITDA MarginNOPAT Margin

Recurring NOPAT Margin

E9

The years shown represent the range of Income Statement years indicated in the Initial Setup ("Earliest" year to "Latest" year). The first forecast year (the "Latest" income statement year plus 1) is shown solely for ratios that only involve beginning balance sheet values.

R9


AE9


D15

Spread: (Operating ROA - Effective interest rate after tax), where the Effective interest rate after tax is defined as Net interest expense after tax / Net debt

D16

Net Financial Leverage: Net Debt / Equity

D48

Recurring NOPAT = NOPAT - Unusual Gain, Net of Unusual Loss (after tax) - Other Income, net of Other Expense (after tax)

Ratio Analysis

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EVALUATING INVESTMENT MANAGEMENT

Working Capital Management:

Operating Working Capital / SalesOperating Working Capital TurnoverAccounts Receivable TurnoverInventory TurnoverAccounts Payable TurnoverDays' ReceivablesDays' InventoryDays' Payables

Long-Term Asset Management:

Net Long-Term Assets TurnoverNet Long-Term Assets / SalesPP&E TurnoverDepreciation & Amortization / Sales

D56

Operating Working Capital Turnover: Sales / Operating Working Capital

D57

Accounts Receivable Turnover: Sales / Accounts Receivable

D58

Inventory Turnover: Cost of Sales / Inventory

D59

Accounts Payable Turnover: Purchases (or Cost of Sales) / Accounts Payable

D60

Days' Receivables: Accounts Receivable / Average sales per day

D61

Days' Inventory: Inventory / Average cost of sales per day

D62

Days' Payables: Accounts Payable / Average purchases (or cost of sales) per day

D66

Net Long-Term Asset Turnover: Sales / (Total long-term assets - Non-interest-bearing liabilities)

D68

PP&E Turnover: Sales / Net property, plant, and equipment

Ratio Analysis

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EVALUATING FINANCIAL MANAGEMENT

Short-Term Liquidity:

Current RatioQuick RatioCash RatioOperating Cash Flow Ratio

Debt and Long-Term Solvency:

Liabilities-to-EquityDebt-to-EquityNet-Debt-to-EquityDebt-to-CapitalNet-Debt-to-Net Capital

Interest Coverage Ratio:

Interest Coverage

Payout Ratio:

Dividend Payout Ratio

Sustainable Growth Rate:

* NA - not available, n/a - not applicable

D76

Current Ratio: Current assets / Current liabilities

D77

Quick Ratio: (Cash+Short-term investments+Accounts Receivable) / Current liabilities

D78

Cash Ratio: (Cash+Marketable securities / Current liabilities

D79

Operating Cash Flow Ratio: Cash flow from operations / Current liabilities

D83

Liabilities-to-Equity ratio: Total liabilities / Shareholders' equity

D84

Debt-to-Equity ratio: (Short-term debt+Long-term debt) / Shareholders' equity

D85

Net-Debt-to-Equity ratio: (Short-term debt+ Long-term debt- Cash and marketable securities) / Shareholders' equity

D86

Debt-to-Capital ratio: (Short-term debt+Long-term debt) / (Short-term debt+Long-term debt+Shareholders' equity)

D87

Net-Debt-to-Net-Capital ratio: (Interest-bearing liabilities-Cash and marketable securities) / (Interest-bearing liabilities-Cash and marketable securities+Shareholders' equity)

D91

Interest Coverage ratio: (Net income+Interest expense+Tax expense) / Interest expense

D95

Dividend Payout Ratio: Cash Dividends Paid / Net Income

D97

Sustainable Growth Rate: ROE * (1- dividend payout ratio), where the dividend payout ratio is defined as: Cash dividend paid / Net income

Key Assumptions

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Note: All yellow-shaded cells require input (including those preset to zero). If the appropriate

value for a blank input cell is zero, enter 0. Inputs are optional for gray-shaded cells.

Historical Ratios Forecast Horizon Terminal Years

Year Ended , () 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Assumptions for years 1-15: Note: Only the most recent historical years reflect accounting adjustments that have been made.

Sales growth rate 0.0% 0.0%Net operating profits after tax / sales 0.0% 0.0%Beginning net operating working capital / sales 0.0% 0.0%Beginning net operating long-term assets / sales 0.0% 0.0%

Assumptions for year 16 and beyond:

Sales growth rateNet operating profit after tax / salesBeginning net operating working capital / sales Beginning net operating long-term assets / sales

Net debt / book value of net capital Preferred equity / book value of net capital Shareholders' equity / book value of net capital

0.0%

Net debt / market value of net capital Preferred equity / market value of net capital Shareholders' equity / market value of net capital

0.0%

Cost of Capital parameters:

Market risk premiumRisk free rateTax rateCost of debtCost of preferred equity (if applicable)Implied debt betaImplied preferred equity betaCommon equity betaImplied asset beta

After tax cost of debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Cost of common equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Number of Common shares outstanding

Book Value Leverage (beginning of year)

Market Value Leverage (beginning of year)

D12

Sales growth rate: Enter your assumptions for sales growth rate in each forecast period.

D13

Net operating profit after tax / sales ratio: Enter your assumptions for NOPAT margins in each forecast period.

D14

Beginning net operating working capital / sales ratio: Please review comment box in cell O14.

O14

Beginning net operating working capital and Beginning net operating long-term assets-to-sales ratios: Beginning net operating working capital and beginning net operating long-term assets for the first forecast year are set by the company. However, sales in this period is determined by the sales growth rate assumption entered in cell O12. Accordingly, the ratios of beginning net operating working capital and beginning net operating long-term assets-to-sales are shown as soon as the sales growth assumption is identified. Also, when deciding on your assumptions, be mindful of the relationship between the assets a firm has to generate sales with (e.g., beginning net operating working capital and beginning net operating long-term assets) and the sales levels it generates with those assets. You may want to consider the historical relationship in setting a sales growth target in the first forecast year. A decline in either ratio implies an increase in productivity (e.g., the firm can generate a given level of sales with fewer operating assets).

D15

Beginning net operating long-term assets / sales ratio: Please review comment box in cell O14

D17

Terminal period assumptions: Enter assumptions for terminal forecast period that reflect your views about the firm's performance in the long term. For example, your estimates may reflect a competitive equilibrium assumption on the firm's total or incremental sales in the terminal period, or they may reflect persistent abnormal performance and growth.

D19

Sales growth rate: Enter your assumptions for sales growth rate in each forecast period.

D20

Net operating profit after tax / sales

D21

Beginning net operating working capital / sales ratio: Please review comment box in cell O14.

D22

Beginning net operating long-term assets / sales ratio: Please review comment box in cell O14.

D24

Book Value Leverage: The beginning book value leverage for the first forecast year is already determined based on the firm's last reported balance sheet. However, you can modify this firm's capital structure in forecast year 2 by changing the gray-shaded book value leverage cells. You may make further adjustments to book leverage in year 3 and on by continuing to enter values in the adjacent cells. Once you reach the point that book leverage is stable in future years, you can stop entering new leverage forecasts. The model will then repeat the last entered forecasts throughout the remaining forecast horizon. Note that if in a given year you change the firm's book leverage (or carry forward the prior year's values in anticipation of making changes in future periods), you must also change (or carry forward) the firm's market leverage and cost of capital parameters in that year. Based on these estimates, the model shows imputed betas for debt, preferred stock, and common equity, assuming that the firm's asset beta remains fixed. Adjustments to the firm's asset beta are permitted in forecast year 2 and beyond. Note that the asset beta will change only if the firm's business changes.

O26

Forecast Year-1 Capital Structure: The first forecast year's capital structure has already been set by the company. Capital structure changes are permitted in forecast year 2 and in all subsequent years.

P26

Forecast year 2 Capital Structure: Capital structure changes are permitted in forecast year 2 and in all subsequent years. If the book value leverage is changed, you will need to update both the market value leverage and the cost of capital parameters below. If a capital structure change is made in year 2 (as denoted by a change in book value leverage), the next year's book value leverage cells will appear with gray-shading to indicate that subsequent adjustments are possible, yet are not required. Capital structure adjustments should only be made if the current year's capital structure will differ from last year's capital structure, or if adjustments are expected in subsequent years.

D31

Market Value Leverage: The default values for market value leverage are the same as the book value leverage ratios above. You can override these cells with estimates based on market value. For example, you can use the market leverage ratio for other firms in the same industry. Alternatively, you can enter a "starting" estimate; then when you have valued the firm you can re-estimate its market leverage and enter revised ratios. After doing this several times, the forecasted market leverage ratios should be consistent with your valuation. Note that, after retrieving a saved scenario, the default values may have changed, and you should reconsider your market value leverage assumptions.

O33

Market Value Leverage: While the first year's book value leverage is set by the company, estimates of the market value of leverage are required for forecast year 1 and for all subsequent years in which the book value of leverage changes. Any change in the market value of leverage necessitates the updating of the cost of capital parameters below.

D40

Market risk premium: Enter your estimate of the risk premium expected for the market as a whole, expressed as the excess of the expected return on the market index over the risk free rate.

D41

Risk free rate: Enter your estimate of the risk free rate. The rate on intermediate-term treasury bonds is often used here.

D42

Tax rate: Enter the tax rate reflecting the marginal tax benefit of interest.

D43

Cost of debt: If a company's beginning ratio of net debt to the market value of net capital (row 33) is zero, no cost of debt input is required. If, however, the ratio is negative, the company's cash exceeds its debt obligations, and a cost of debt value is required. Additionally, when the ratio is negative, this implies that the firm is in a lending (vs. borrowing) position and, in most cases, the cost of debt (here, the lending rate) would not exceed the risk free rate.

D44

Cost of preferred equity: The default setting is the before-tax cost of preferred equity. For users interested in the after-tax cost of preferred stock (e.g., ESOPs), the after-tax cost equals the pre-tax cost multiplied by (1-tax rate). The tax rate is found in cell O42.

D47

Common equity beta: The common equity beta is a measure of the systematic risk of equity and reflects the sensitivity of the firm's value to economy-wide market movements. It can be estimated directly using the firm's stock returns and the capital asset pricing model.

D48

Asset Beta: The asset beta in forecast year 1 is fixed, however, adjustments are permitted in forecast years 2 and beyond. Note that the asset beta will change only if the firm's business changes, therefore, the default setting for the firm's asset beta in each forecast year is the prior year's asset beta value.

D54

Number of Common shares outstanding: The number of common shares outstanding must be expressed in the same units used in the imported financial statements. The figure shown is retrieved automatically if previously classified on the imported income statement or imported balance sheet. If the number of shares outstanding is reported on these financial statements, please confirm that the units match. If the number of shares outstanding is not reported in the financial statements, please enter the figure in cell O54, again, making sure that the units are the same as those in the financial statements.

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Performance Charts

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HISTORIC and FORECAST CHARTS for

Sales Growth 10-Year Historic Sales Growth for Comparable U.S. Firms

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Net Operating Profit after Tax (NOPAT) Margin 10-Year Historic NOPAT Margin for Comparable U.S. Firms

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ales

Year Year

Historic Net Operating Asset Turnover 10-Year Historic Net Operating Asset Turnover for Comparable U.S. Firms

Sal

es /

Net

Op

erat

ing

Ass

ets

Sal

es /

Net

Op

erat

ing

Ass

ets

Year Year

Operating Return-on-Assets (ROA) 10-Year Historic Operating ROA for Comparable U.S. Firms

Year Year

Return-on-Equity (ROE) 10-Year Historic ROE for Comparable U.S. Firms

Year Year

(1) Herein, comparable firms are defined as all publicly traded U.S. firms between the years 1984 and 2001, whose measure of interest (e.g., sales growth, NOPAT margin, ROE, etc.) resides within the same quintile as (for which the measure was taken in the latest income statement year).

10-Year Historic Performance of Comparable U.S. Firms(1)

Net

Op

erat

ing

Pro

fit

afte

r T

ax /

S

ales

Net

Op

erat

ing

Pro

fit

afte

r T

ax /

Net

Ass

ets

Ne

t O

pe

rati

ng

Pro

fit

afte

r T

ax

/ N

et

As

se

ts

Net

In

com

e /

Beg

inn

ing

S

har

eho

lder

s' E

qu

ity

Net

In

com

e /

Beg

inn

ing

S

har

eho

lder

s' E

qu

ity

0 1 2 3 4 5 6 7 8 9-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

0 1 2 3 4 5 6 7 8 9-35%

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

0 1 2 3 4 5 6 7 8 90.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

0 1 2 3 4 5 6 7 8 9-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

0 1 2 3 4 5 6 7 8 9-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1 2 3 4 5 6 7 8 9 10-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

1 2 3 4 5 6 7 8 9 10-35%-30%-25%-20%-15%-10%-5%0%5%

10%15%20%25%

1 2 3 4 5 6 7 8 9 100.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

1 2 3 4 5 6 7 8 9 10-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

1 2 3 4 5 6 7 8 9 10-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

Overview and Instructions

Return to BAV Dashboard

Pro Formas & Valuation

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PRO FORMA FINANCIAL STATEMENTS

Historical Forecast Horizon Terminal Years

Year Ended , () -1 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Beg. Net Working Capital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0+ Beg. Net Long-Term Assets 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0= Net Operating Assets 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0

Net Debt

+ Preferred Stock + Shareholders' Equity = Net Capital

Income Statement Sales 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net operating profits after tax 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0- Net interest expense after tax = Net income - Preferred dividends 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0= Net income to common

Operating Return on Assets 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Return on Common Equity Book Value of Assets Growth Rate 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Book Value of Common Equity Growth Rate Net Operating Asset Turnover 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Free Cash Flow to Equity

Discount Factor - Common Equity 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00Book Value of Equity Growth Factor (cumulative) 1.00Cost of Common Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%


Overview and Instructions

Return to BAV Dashboard

D13

Reminder: The Balance Sheet values displayed are BEGINNING Balance Sheet values for the years ending on the dates shown above.

D32

The ratios shown here are calculated based on the Pro-Forma Financial Statements above, which are themselves determined by the Condensed Financial Statements and your Key Assumptions inputs.

D33


D34


D35


D36



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Forecast Horizon Terminal Years

Year Ended , () 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

DCF Valuation of the Equity

Net Income to Common- Investment in Net Working Capital 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0- Investment in Net Long-Term Assets 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0+ Increase in debt obligations+ Increase in preferred equity= Free Cash Flow to Equity* Discount factor - Common Equity (CAPM) 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00= Present value of Free Cash Flow to Equity

PV of FCF to Equity (years 1-15) 0+PV of FCF to Equity beyond Year 15= Value of the Equity 0.0

Number of shares outstanding (MM)

Estimated value per share


Year Ended , () 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Abnormal Earnings Valuation of the Equity

Net Income to Common- Charge for Common Equity Capital = Residual Operating Income* Discount factor - Common Equity 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00= Present Value of Residual Operating Income

PV of Residual Operating Income (years 1-15) 0+ PV of Residual Operating Income beyond Year 15+ Beg. Book Value of Equity= Value of the Equity 0.0




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Year Ended , () 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Abnormal Returns Valuation of the Equity

Return on Common Equity- Cost of Common Equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%= Abnormal Returns* Discount Factor - Common Equity 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00* Book Value of Equity Growth Factor 1.00= Present Value of Abnormal Return on Common Equity

+ Beg. Book Value of Common Shareholders' Equity = Value of the Equity 0.0

Implied Market to Book Value Ratio



Beg. Book Value of Common Equity * PV of Abnormal ROE (years 1-15)

+ Beg. Book Value of Common Equity * PV of Abnormal ROE beyond year 15

Valuation Summary

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Reminders:

Table 1. Valuation Summary-

Valuation Summary:

() Equity Value Equity Value No reminders to report.

per shareDiscounted Cash Flows $0.0

Abnormal Earnings $0.0

Abnormal Returns $0.0

Table 2. Accounting Adjustments and Summary of Effects on 's Financial Statements:

Accounting Adjustments Effect on: As Reported Adjusted Difference()

Net Income to Common

Return on Common Equity (ROE)

NO ADJUSTMENTS RECORDED

Table 3. Key Assumptions (Note: Assumptions cannot be modified in this worksheet.

Beginning Book Value of Common Shareholders' Equity

B8

Please Note: If a scenario number is shown, this scenario number was the last scenario to be reviewed or saved. If after saving this scenario subsequent changes are made, the effects of those changes are reflected in the Table 1 valuation results. However, unless those changes are re-saved into the same scenario number shown, you are in effect viewing a modified version of the scenario number shown. This explains why the Table 1 valuation results may differ from the Table 4 valuation results for the same scenario number.

Valuation Summary

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To further revise assumptions, please return to the Key Assumptions sheet.)

Historical Ratios Forecast Horizon Terminal Years

Year Ended , () 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17

Assumptions for years 1-15:

Sales growth rate Net operating profits after tax / sales Beginning net operating working capital / sales Beginning net operating long-term assets / sales

Assumptions for year 16 and beyond:

Sales growth rateNet operating profit after tax / salesBeginning net operating working capital / sales Beginning net operating long-term assets / sales

Book Value Leverage (beginning of year)

Net debt / book value of net capital Preferred equity / book value of net capital Shareholders' equity / book value of net capital

0.0%

Market Value Leverage (beginning of year)

Net debt / market value of net capital Preferred equity / market value of net capital Shareholders' equity / market value of net capital

0.0%

Cost of Capital parameters:

Market risk premiumRisk free rateTax rateCost of debtCost of Preferred equity (if applicable)Implied Debt BetaImplied Preferred Equity BetaCommon Equity BetaImplied asset beta

After tax cost of debt 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%Cost of common equity 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Pro Forma ROE

Number of Common shares outstanding

B111

The default setting is the before-tax cost of preferred equity. For users interested in the after-tax cost of preferred stock (e.g., ESOPs), the after-tax cost equals the pre-tax cost multiplied by (1-tax rate). The tax rate is found in cell O42.

B124

Subsequent per share value calculations require that the number of common shares outstanding and the financial statement data be expressed in the same units. The figure shown is retrieved automatically if previously classified on the imported income statement or balance sheet. If the number of shares outstanding is reported on these financial statements, please confirm that the units are the same. If the number of shares outstanding is not reported on these financial statements, please enter the figure in cell F41, again, making sure that the units are the same as those in the financial statements.

Valuation Summary

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Table 4. Valuation Summary, all stored scenarios for :

() Equity Value Equity Value

per shareScenario 1

Discounted Cash Flows $0.0 $0.00Abnormal Earnings $0.0 $0.00Abnormal Returns $0.0 $0.00

Scenario 2


Scenario 3


Scenario 4


Scenario 5


1Scen02

0C

00.69

688.99--------------------

1306.85220.34

0000

--------------------1527.19

--------------------

0322.14

0898.52

0--------------------

1220.66--------------------

2747.85Err:510

35796

1Scen02

--------------------

--------------------

--------------------

--------------------

--------------------

1Scen03

0C

0100.36650.34

BAV Model v4.7

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