DCF Analysis Completed
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Investment BankingValuation, Leveraged Buyouts,
and Mergers & Acquisitions
DCF Analysis - Completed
JOSHUA ROSENBAUM
JOSHUA PEARL
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alueCo Corporationensitivity Analysis
$ in millions)
Enterprise Value
Exit Multiple
1,133.3 6.0x 6.5x 7.0x 7.5x 8.0x 858.3 6.0x
10.0% 1,060 1,119 1,177 1,236 1,295 10.0% 785
10.5% 1,040 1,098 1,155 1,213 1,270 10.5% 765
11.0% 1,021 1,077 $1,133 1,190 1,246 11.0% 74611.5% 1,002 1,057 1,112 1,167 1,222 11.5% 72712.0% 984 1,038 1,091 1,145 1,199 12.0% 709
Implied Share Price PV of T
Exit Multiple
17.2 6.0x 6.5x 7.0x 7.5x 8.0x 0.7 6.0x
10.0% 17.17 17.17 17.17 17.17 17.17 10.0% 66.6% 10.5% 17.17 17.17 17.17 17.17 17.17 10.5% 66.3%11.0% 17.17 17.17 $17.17 17.17 17.17 11.0% 66.1%
11.5% 17.17 17.17 17.17 17.17 17.17 11.5% 65.8%
12.0% 17.17 17.17 17.17 17.17 17.17 12.0% 65.6%
Implied Perpetuity Growth Rate
Exit Multiple
0.0 6.0x 6.5x 7.0x 7.5x 8.0x 7.7 6.0x
10.0% 0.9% 1.5% 2.1% 2.6% 3.0% 10.0% 7.2x
10.5% 1.3% 2.0% 2.5% 3.0% 3.5% 10.5% 7.1x
11.0% 1.7% 2.4% 3.0% 3.5% 3.9% 11.0% 7.0x
11.5% 2.2% 2.8% 3.4% 3.9% 4.4% 11.5% 6.8x
12.0% 2.6% 3.3% 3.9% 4.4% 4.8% 12.0% 6.7x
WACC
WACC
WACC
WACC
Imp
WACC
WACC
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ValueCo CorporationWeighted Average Cost of Capital Analysis($ in millions)
Capital Structure Predicted Market Market Debt/
Debt-to-Total Capitalization 30.0% Company Levered Beta(4)
Value of Debt Value of Equity Equity
Equity-to-Total Capitalization 70.0% Adler Industries 1.11 $575.0 $2,600.0 22Lanzarone International 1.08 515.0 1,750.0 29Lajoux Global 1.35 715.0 1,050.0 68
Cost of Debt Momper Corp. 1.25 550.0 1,000.0 55Cost of Debt 6.0% McMenamin & Co. 1.19 250.0 630.0 39
Tax Rate 38.0%After-tax Cost of Debt 3.7% Mean 1.20 42Median 1.19 39
Cost of Equity
Risk-free Rate(1) 4.0% Mean Target
Market Risk Premium(2) 7.1% Unlevered Debt/
Levered Beta 1.20 Beta Equity
Size Premium(3) 1.65% Relevered Beta 0.95 42
Cost of Equity 14.1%
WACC 11.0% 0.1 5.0% 5.5% 6.0%10.0% 11.9% 11.9% 11.9%
20.0% 11.3% 11.4% 11.5%30.0% 10.8% 10.9% 11.0%
40.0% 10.3% 10.4% 10.6%50.0% 9.8% 10.0% 10.1%
(1) Interpolated yield on 20-year U.S. Treasury(2) Obtained from Ibbotson SBBIValuation Yearbook
(3) Low-Cap Decile size premium based on market capitalization, per Ibbotson
(4) Sourced from Barra
Pre-tax Cost of
Debt-to
-Total
Capitalization
WACC Calculation Comparable Companies Unlevered Beta
ValueCo Relevered Beta
WACC Sensitivity Analysis
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Copyright 2009 by Joshua Rosenbaum and Joshua Pearl. All rights reserved.
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