FCFF VALUATION MODEL
Before you start The spreadsheet has circular reasoning. This is not a problem. Go into calculation options (in excel) and check
the iteration box.
What the model does
This model is designed to value firms with operating income that is either positive or can be normalized to be
positive. It allows for up to 15 years of high growth, and can be used either as a 2-stage or a 3-stage model.
Inputs
The inputs are in the following pages:
1. The bulk of the inputs are in the master inputs page. Here, you can input the numbers from the current
financial statements, and review and change the inputs for the valuation.
2. If you want to normalized operating income, use the earnings normalizer worksheet.
3. If you have R&D or operating leases, you will need to input the required numbers in those worksheets.
Important: Be consistent about the units you use. If you use millions, use millions for all of your inputs.
Options
The spreadsheet can be used to value a company, with fixed inputs for a high growth phase and different inputs
for a stable growth phase (2-stage model) or it can be adjusted to allow for a transition phase (3-stage model).
To switch from one to the other, enter yes in the master input page to the question of whether you want the
inputs adjusted during the second half of the high growth phase.
You can even make it a stable growth model, by setting the length of the high growth period to zero.
Other worksheets There are two other worksheets that you might find useful at the end of this spreadsheet
1. Bottom-up beta estimator: will estimate your levered beta, given an unlevered beta (which you will have to
input.
2. Industry averages: Here, you can look up industry averages for variables such as beta, return on capital,
reinvestment rates and working capital.
Output
The output is contained in the valuation model worksheet.
n excel) and check
normalized to be
3-stage model.
and different inputs
e (3-stage model).
er you want the
h you will have to
urn on capital,
Your Stock
Intrinsic Price
$512.07
Master Input Sheet
Do you want to capitalize R&D expenses?
Do you want to convert operating leases to debt?
Do you want to normalize operating income?
No
No
No
If yes, please input your numbers into
If yes, please input your numbers into
If yes, please input your numbers into
Inputs
From Current Financials
Current EBIT =
Current Interest Expense =
Current Capital Spending
Current Depreciation & Amort'n =
Effective tax rate (for use on operating income)
Marginal tax rate (for use on cost of debt)
Current Revenues =
Current Non-cash Working Capital =
Chg. Working Capital =
Book Value of Debt =
Book Value of Equity =
Cash & Marketable Securities =
Value of Non-operating Assets =
Minority interests
Market Data for your firm
Is your stock currently traded?
If yes, enter the following:
Current Stock Price =
Number of shares outstanding =
Market Value of Debt =
If no, enter the following
Would you like to use the book value debt ratio?
If no, enter the debt ratio to use in valuation
$532,720.00 ! If negative, go back and choose to normalize earnin
$1,751.00
$199,926.00
$96,054.00
38.74%
38.00%
Previous year-end
$3,214,591.00 $2,731,224.00
$343,104.00
$119,050.00 Previous year-end
$0.00
$0.00
$1,538,228.00 $1,245,926.00
$323,203.00
$0.00
$0.00
$322,553.00
$0.00
$0.00
Yes
$600.61
31,080.00
$0.00
No
35%
General Market Data
Long Term Riskfree rate=
Risk premium for equity =
3.00%
5.00%
Ratings
Do you want to estimate the firm's synthetic rating =
If yes, choose the type of firm
If not, what is the current rating of the firm?
Enter the cost of debt associated with the rating =
No
2
BBB
5.75%
Options
Do you have equity options (management options, warrants) outstanding? No
If yes, enter the number of options
51.00
Average strike price
$40.35
Average maturity
8.3
Standard Deviation in stock price
25%
You can use the cost of capital spreadsheet to compu
! If yes, use the rating estimator worksheet that is atta
Do you want to use the stock price to value the option or your estimatedCurrent
value?Price
Valuation Inputs
High Growth Period
The questions below, especially the yes or no ones, can be confusing. P
Length of high growth period =
10
Beta to use for high growth period for your firm=
0.97
You can use the cost of capital spreadsheet to compu
Do you want to keep the debt ratio computed from your inputs?
Yes
If yes, the debt ratio that will be used to compute the cost of capital is
0.00%
If no, enter the debt ratio that you would like to use in the high growth period
100.00%
Do you want to keep the existing ratio of working capital to revenue?
Yes
If yes, the working capital as a percent of revenues will be
10.67%
If no, enter the ratio of working capital to revenues to use in analysis
12%
Do you want to compute your growth rate from fundamentals?
No
If no, enter the expected growth rate in operating income for high growth period
21%
If yes, the inputs to the fundamental growth calculation (based upon your inputs) are
Return on Capital =
35.77%
Reinvestment Rate =
68.31%
Do you want to change these inputs?
No
Return on Capital =
19.47%
Reinvestment Rate =
68.31%
Do you want me to gradually adjust your high growth inputs in the second half?
Yes
Stable Growth Period
Growth rate during stable growth period =
3.00%
Beta to use in stable growth period =
1.00
Risk premium for equity in stable growth period =
5.00%
Debt Ratio to use in stable growth period =
0.00%
Pre-tax cost of debt in stable growth period =
9.00%
Tax Rate to use in stable growth period =
38.00%
To compute the reinvestment rate in stable growth, you have two options
Do you want to compute reinvestment needs in stable growth based on fundamentals?
Yes
If yes, enter the return on capital that the firm will have in stable growth 35.27%
If no, enter capital expenditure as % of depreciation in stable growth
120%
(in percent)
yes or no ones, can be confusing. Please read the comments on the input cells.
Normalizing Earnings
Approach used to normalize earnings =
3
If historical average,
Average Earnings before interest and taxes =
3500
If historical average ROC,
Historical average pre-tax return on capital =
22%
If sector margin
Pre-tax Operating Margin for Sector =
14.72%
! Look at industry average
Normalized Earnings before interest and taxes = $473,081.82
Worksheet for normalization (Last 5 years of data)
-5
-4
Revenues
2032
2376
EBIT
186
454
Operating Margin
9.15%
19.11%
-3
2779
529
19.04%
-2
3155
448
14.20%
-1
3248
383
11.79%
Total
13590
2000
14.72%
R & D Converter
This spreadsheet converts R&D expenses from operating to capital expenses. It makes the appropriate adjustments to operating income, net
income, the book value of assets and the book value of equity.
Inputs
Over how many years do you want to amortize R&D expenses
5
! If in doubt, use the lookup table below
Enter the current year's R&D expense =
$1,771.00 The maximum allowed is ten years
Enter R& D expenses for past years: the number of years that you will need to enter will be determined by the amortization period
Do not input numbers in the first column (Year). It will get automatically updated based on the input above.
Year
-1
-2
-3
-4
-5
0
0
0
0
0
Output
Year
Current
-1
-2
-3
-4
-5
0
0
0
0
0
R& D Expenses
1678.00
! Year -1 is the year prior to the current year
1529.00
! Year -2 is the two years prior to the current year
1367.00
1267.00
1205.00
R&D Expense
1771.00
1678.00
1529.00
1367.00
1267.00
1205.00
0.00
0.00
0.00
0.00
0.00
Value of Research Asset =
Unamortized portion
1.00
1771.00
0.80
1342.40
0.60
917.40
0.40
546.80
0.20
253.40
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
$4,831.00
Amortization this year
$335.60
$305.80
$273.40
$253.40
$241.00
$0.00
$0.00
$0.00
$0.00
$0.00
$1,409.20
Amortization of asset for current year =
Adjustment to Operating Income =
Tax Effect of R&D Expensing
$1,409.20
$361.80 ! A positive number indicates an increase in operating income (add to reported EBIT)
$137
Look Up Table for Amortization Periods
Industry Name Amortization Period
Advertising
2
Aerospace/Defense
10
Air Transport
10
Aluminum
5
Apparel
3
Auto & Truck
10
Auto Parts (OEM)
5
Auto Parts (Replacement) 5
Bank
2
Bank (Canadian)
2
Bank (Foreign)
2
Bank (Midwest)
2
Beverage (Alcoholic)
3
Beverage (Soft Drink)
3
Building Materials
5
Cable TV
10
Canadian Energy
10
Cement & Aggregates
10
Chemical (Basic)
10
Chemical (Diversified)
10
Chemical (Specialty)
10
Coal/Alternate Energy
5
Computer & Peripherals
5
Computer Software & Svcs 3
Copper
5
Diversified Co.
5
Drug
10
Drugstore
3
Educational Services
3
Non-technological Service
Retail, Tech Service
Light Manufacturing
Heavy Manufacturing
Research, with Patenting
Long Gestation Period
2 years
3 years
5 years
10 years
10 years
10 years
Electric Util. (Central)
Electric Utility (East)
Electric Utility (West)
Electrical Equipment
Electronics
Entertainment
Environmental
Financial Services
Food Processing
Food Wholesalers
Foreign Electron/Entertn
Foreign Telecom.
Furn./Home Furnishings
Gold/Silver Mining
Grocery
Healthcare Info Systems
Home Appliance
Homebuilding
Hotel/Gaming
Household Products
Industrial Services
Insurance (Diversified)
Insurance (Life)
Insurance (Prop/Casualty)
Internet
Investment Co. (Domestic)
Investment Co. (Foreign)
Investment Co. (Income)
Machinery
Manuf. Housing/Rec Veh
Maritime
Medical Services
Medical Supplies
Metal Fabricating
Metals & Mining (Div.)
Natural Gas (Distrib.)
Natural Gas (Diversified)
10
10
10
10
5
3
5
2
3
3
5
10
3
5
2
3
5
5
3
3
3
3
3
3
3
3
3
3
10
5
10
3
5
10
5
10
10
Newspaper
Office Equip & Supplies
Oilfield Services/Equip.
Packaging & Container
Paper & Forest Products
Petroleum (Integrated)
Petroleum (Producing)
Precision Instrument
Publishing
R.E.I.T.
Railroad
Recreation
Restaurant
Retail (Special Lines)
Retail Building Supply
Retail Store
Securities Brokerage
Semiconductor
Semiconductor Cap Equip
Shoe
Steel (General)
Steel (Integrated)
Telecom. Equipment
Telecom. Services
Textile
Thrift
Tire & Rubber
Tobacco
Toiletries/Cosmetics
Trucking/Transp. Leasing
Utility (Foreign)
Water Utility
3
5
5
5
10
5
5
5
3
3
5
5
2
2
2
2
2
5
5
3
5
5
10
5
5
2
5
5
3
5
10
10
Operating Lease Converter
Inputs
Operating lease expense in current year =
Operating Lease Commitments (From footnote to financials)
Year
Commitment ! Year 1 is next year, ….
1
$ 185,866.00
2
$ 189,474.00
3
$ 189,514.00
4
$ 190,256.00
5
$ 193,243.00
6 and beyond ###########
$504.00
Output
Pre-tax Cost of Debt =
5.75%
! If you do not have a cost of debt, use the ratings estimator
From the current financial statements, enter the following
Reported Operating Income (EBIT) =
$532,720.00 ! This is the EBIT reported in the current income statement
Reported Debt =
$0.00 ! This is the interest-bearing debt reported on the balance sheet
Number of years embedded in yr 6 estimate =
10
! I use the average lease expense over the first five years
to estimate the number of years of expenses in yr 6
Converting Operating Leases into debt
Year
Commitment
Present Value
1 $ 185,866.00
$175,759.81
2 $ 189,474.00
$169,429.44
3 $ 189,514.00
$160,250.79
4 $ 190,256.00
$152,130.70
5 $ 193,243.00
$146,117.38
6 and beyond $ 190,816.90
$1,074,626.99 ! Commitment beyond year 6 converted into an annuity for ten years
Debt Value of leases =
$
1,878,315.11
Restated Financials
Depreciation on Operating Lease Asset =
Adjustment to Operating Earnings =
Adjustment to Total Debt outstanding =
$125,221.01 ! I use straight line depreciation
($124,717.01) ! Operating lease expense - Depr
###########
Two-Stage FCFF Discount Model
Input Summary
Normalized EBIT (before adjustments) $532,720.00
Adjusted EBIT =
$532,720.00
Adjusted Interest Expense =
$1,751.00
Adjusted Capital Spending
$199,926.00
Adjusted Depreciation & Amort'n =
$96,054.00
Tax Rate on Income =
Current Revenues =
38.00%
$3,214,591.00
Current Non-cash Working Capital =
$343,104.00
Chg. Working Capital =
$119,050.00
Adjusted Book Value of Debt =
$0.00
Adjusted Book Value of Equity =
$1,245,926.00
Length of High Growth Period =
10
Forever
21.45%
3.00%
Debt Ratio used in Cost of Capital Calculation=
0.00%
0.00%
Growth Rate =
Beta used for stock =
0.97
1.00
Riskfree rate =
3.00%
3.00%
Risk Premium =
5.00%
5.00%
Cost of Debt =
5.75%
9.00%
Effective Tax rate (for cash flow) =
38.74%
38.00%
Marginal tax rate (for cost of debt) =
38.00%
38.00%
Return on Capital =
35.77%
35.27%
Reinvestment Rate =
68.31%
8.51%
Page 14
Two-Stage FCFF Discount Model
Output from the program
Cost of Equity =
7.85%
Equity/(Debt+Equity ) =
100.00%
After-tax Cost of debt =
3.57%
Debt/(Debt +Equity) =
0.00%
Cost of Capital =
7.85%
Intermediate Output
Expected Growth Rate
21.45%
Working Capital as percent of revenues =
10.67%
(in percent)
The FCFF for the high growth phase are shown below (upto 10 years)
Current
1
2
Expected Growth Rate
21.45%
21.45%
Cumulated Growth
121.45%
147.50%
Reinvestment Rate
68.31%
68.31%
$532,720
$646,988
$785,767
Tax rate (for cash flow) 38.74%
38.67%
38.59%
$326,344
$396,824
$482,524
- (CapEx-Depreciation)$103,872
$197,470
$240,225
-Chg. Working Capital$119,050
$73,596
$89,382
Free Cashflow to Firm $103,422
$125,758
$152,917
Cost of Capital
7.85%
7.85%
Cumulated Cost of Capital
1.0785
1.1632
$116,605
$131,467
EBIT
EBIT * (1 - tax rate)
Present Value
Growth Rate in Stable Phase =
3.00%
Reinvestment Rate in Stable Phase =
8.51%
FCFF in Stable Phase =
Cost of Equity in Stable Phase =
$1,340,076.48
8.00%
Page 15
Two-Stage FCFF Discount Model
Equity/ (Equity + Debt) =
100.00%
AT Cost of Debt in Stable Phase =
5.58%
Debt/ (Equity + Debt) =
0.00%
Cost of Capital in Stable Phase =
8.00%
Value at the end of growth phase = $26,801,529.65
Valuation
Present Value of FCFF in high growth phase =
Present Value of Terminal Value of Firm =
Value of operating assets of the firm =
Value of Cash, Marketable Securities & Non-operating assets =
Value of Firm =
Market Value of outstanding debt =
Minority Interests
Market Value of Equity =
Value of Equity in Options =
Value of Equity in Common Stock =
Market Value of Equity/share =
Page 16
Two-Stage FCFF Discount Model
Input Summary
Input Diagnostics
Stable growth debt ratio is set to same value as high growth debt ratio. While this is possible, stable growth companies usually carry more debt. Look at the industry average
This is a high cost of debt for stable growth. Consider moving this down.
Your return on capital exceeds your cost of capital by more than 5%. That is unusually high. Does your company have that sustainable a competitive advantage?
Imputed Return on capital forever =
Page 17
Two-Stage FCFF Discount Model
Output from the program
3
21.45%
179.14%
68.31%
$954,315
38.52%
$586,732
$292,235
$108,555
$185,942
7.85%
1.2545
$148,224
Page 18
Two-Stage FCFF Discount Model
Valuation
$3,056,174.22
$12,535,652.17
$15,591,826.39
$323,203.00
$15,915,029.39
$0.00
$0.00
$15,915,029.39
$0.00
$15,915,029.39
$512.07
Page 19
Two-Stage FCFF Discount Model
Revisit input cell
B54
B74
B77
B75
B78
B79
B82
B81-83
35.27%
Page 20
Two-Stage FCFF Discount Model
4
5
6
7
8
9
10
21.45%
21.45%
17.76%
14.07%
10.38%
6.69%
3.00%
217.57%
264.23%
311.16%
354.94%
391.78%
417.99%
430.53%
Terminal Year
68.31%
68.31%
56.35%
44.39%
32.43%
20.47%
8.51%
$1,159,015
$1,407,624
$1,657,618
$1,890,845
$2,087,114
$2,226,742
$2,293,544
38.44%
38.37%
38.30%
38.22%
38.15%
38.07%
38.00%
38.00%
$713,443
$867,519
$1,022,816
$1,168,126
$1,290,922
$1,378,932
$1,421,998
###########
$355,505
$432,473
$415,328
$368,291
$292,198
$192,289
$77,928
$52,715.22
$131,840
$160,119
$161,011
$150,212
$126,410
$89,929
$43,025
$71,865.79
$226,098
$274,927
$446,477
$649,623
$872,314
$1,096,714
$1,301,045
###########
7.85%
7.85%
7.88%
7.91%
7.94%
7.97%
8.00%
1.3529
1.4592
1.5741
1.6986
1.8335
1.9797
2.1380
$167,116
$188,415
$283,634
$382,435
$475,759
$553,993
$608,527
Page 21
Two-Stage FCFF Discount Model
Page 22
Valuing Options or Warrants
Enter the current stock price =
Enter the strike price on the option =
Enter the expiration of the option =
Enter the standard deviation in stock prices =
Enter the annualized dividend yield on stock =
Enter the treasury bond rate =
Enter the number of warrants (options) outstanding =
Enter the number of shares outstanding =
$600.61
$40.35
8.3
25.00% (volatility)
0.00%
3.00%
51.00
31,080.00
Do not input any numbers below this line
VALUING WARRANTS WHEN THERE IS DILUTION
Stock Price=
600.61 # Warrants issued=
Strike Price=
40.35 # Shares outstanding=
Adjusted S =
600.5583857 T.Bond rate=
Adjusted K =
40.35 Variance=
Expiration (in years) =
8.3 Annualized dividend yield=
Div. Adj. interest rate=
d1 =
N (d1) =
4.45494563
0.999995804
d2 =
N (d2) =
3.734702616
0.999906031
Value per option =
Value of all options outstanding =
$569.10
$29,023.10
50.998
31,080
3.00%
0.0625
0.00%
3.00%
Estimation of Current Cost of Capital
Inputs
Equity
Number of Shares outstanding =
Current Market Price per share =
31080.00
$600.61
Unlevered beta =
Riskfree Rate =
Equity Risk Premium =
0.97
3.00%
5.00%
Debt
Book Value of Straight Debt =
Interest Expense on Debt =
Average Maturity =
$0.00
$1,751.00
5
Pre-tax Cost of Debt =
Tax Rate =
3.65%
38%
Book Value of Convertible Debt =
Interest Expense on Convertible =
Maturity of Convertible Bond =
Market Value of Convertible =
Debt value of operating leases =
0
0
0
0
$
Preferred Stock
Number of Preferred Shares =
Current Market Price per Share=
Annual Dividend per Share =
-
0
70
5
Output
Estimating Market Value of Straight Debt =
Estimated Value of Straight Debt in Convertible =
Value of Debt in Operating leases =
Estimated Value of Equity in Convertible =
Levered Beta for equity =
Market Value
Weight in Cost of Capital
Cost of Component
Equity
############
99.96%
7.86%
$7,872.38
$0.00
$0.00
$0.00
0.97
Debt
Preferred Stock
Capital
$7,872.38
$0.00 ############
0.04%
0.00%
100.00%
2.26%
7.14%
7.86%
If you are a multinational company and have a breakdown by country, you can use this
Country
Revenues
ERP
Brazil
800
Total
800
Weight
7.85%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
Weighted ERP
7.85%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
7.85%
If you are a multinational company and have a breakdown only by region, you can use
Region
Revenues
Africa
Asia
Australia & New Zealand
Caribbean
Central and South America
Eastern Europe & Russia
Middle East
North America
Western Europe
Global
Total
ERP
0
0
0
0
40
0
0
40
Weight
10.04%
6.51%
5.00%
12.65%
8.62%
7.96%
6.14%
5.00%
6.29%
6.35%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
0.00%
100.00%
0.00%
0.00%
100.00%
Weighted ERP
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
0.0000%
5.0000%
0.0000%
0.0000%
5.0000%
If you are a multi-business company, you can input the following
Business
Revenues
EV/Sales
Estimated ValueUnlevered Beta
Toiletries/Cosmetics $
100.00
1.7329 $
173.29
0.9727
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
Company
$
100.00
$
$
$
$
$
$
$
$
$
$
$
$
173.29
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.0000
0.9727
wn by country, you can use this table (for up to 10 countries)
Inputs for synthetic rating estimation
Enter the type of firm =
2 (Enter 1 if large manufacturing firm, 2 if smaller or riskier firm, 3 if financial service firm)
Enter current Earnings before interest and taxes (EBIT) =
$532,720.00 (Add back only long term interest expense fo
Enter current interest expenses =
$1,751.00 (Use only long term interest expense for fina
Enter current long term government bond rate =
3.00%
Output
Interest coverage ratio =
304.24
Estimated Bond Rating =
Aaa/AAA
Estimated Default Spread =
0.40%
Estimated Cost of Debt =
3.40%
For large manufacturing firms
If interest coverage ratio is
>
≤ to
-100000
0.199999
0.2
0.649999
0.65
0.799999
0.8
1.249999
1.25
1.499999
1.5
1.749999
1.75
1.999999
2
2.2499999
2.25
2.49999
2.5
2.999999
3
4.249999
4.25
5.499999
5.5
6.499999
6.5
8.499999
8.50
100000
Rating is
D2/D
C2/C
Ca2/CC
Caa/CCC
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA
Aaa/AAA
Spread is
12.00%
10.50%
9.50%
8.75%
7.25%
6.50%
5.50%
4.00%
3.00%
2.00%
1.30%
1.00%
0.85%
0.70%
0.40%
For smaller and riskier firms
If interest coverage ratio is
greater than
≤ to
-100000
0.499999
0.5
0.799999
0.8
1.249999
1.25
1.499999
1.5
1.999999
2
2.499999
2.5
2.999999
3
3.499999
3.5
3.9999999
4
4.499999
4.5
5.999999
6
7.499999
7.5
9.499999
9.5
12.499999
12.5
100000
Rating is
D2/D
C2/C
Ca2/CC
Caa/CCC
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA
Aaa/AAA
Spread is
12.00%
10.50%
9.50%
8.75%
7.25%
6.50%
5.50%
4.00%
3.00%
2.00%
1.30%
1.00%
0.85%
0.70%
0.40%
For financial service firms
If long term interest coverage ratio is
greater than
≤ to
-100000
0.049999
0.05
0.099999
0.1
0.199999
0.2
0.299999
0.3
0.399999
0.4
0.499999
0.5
0.599999
0.6
0.749999
0.75
0.899999
0.9
1.199999
1.2
1.49999
1.5
1.99999
2
2.49999
2.5
2.99999
3
100000
or riskier firm, 3 if financial service firm)
Add back only long term interest expense for financial firms)
Use only long term interest expense for financial firms)
est coverage ratio is
Rating is
D2/D
C2/C
Ca2/CC
Caa/CCC
B3/BB2/B
B1/B+
Ba2/BB
Ba1/BB+
Baa2/BBB
A3/AA2/A
A1/A+
Aa2/AA
Aaa/AAA
Spread Operating
is
Income Decline
12.00%
-50.00%
10.50%
-40.00%
9.50%
-40.00%
8.75%
-40.00%
7.25%
-25.00%
6.50%
-20.00%
5.50%
-20.00%
4.00%
-20.00%
3.00%
-20.00%
2.00%
-20.00%
1.30%
-17.50%
1.00%
-15.00%
0.85%
-10.00%
0.70%
-5.00%
0.40%
0.00%
Industry Name
Advertising
Aerospace/Defense
Air Transport
Apparel
Auto Parts
Automotive
Bank
Bank (Midwest)
Beverage
Biotechnology
Building Materials
Cable TV
Chemical (Basic)
Chemical (Diversified)
Chemical (Specialty)
Coal
Computer Software
Computers/Peripherals
Diversified Co.
Drug
E-Commerce
Educational Services
Electric Util. (Central)
Electric Utility (East)
Electric Utility (West)
Electrical Equipment
Electronics
Engineering & Const
Entertainment
Entertainment Tech
Environmental
Financial Svcs. (Div.)
Food Processing
Foreign Electronics
Funeral Services
Furn/Home Furnishings
Healthcare Information
Heavy Truck & Equip
Homebuilding
Hotel/Gaming
Household Products
Human Resources
Industrial Services
Information Services
Insurance (Life)
Insurance (Prop/Cas.)
Internet
Investment Co.
IT Services
Machinery
Maritime
Number
Annual Average
of firms Revenue growth
Pre-tax- Operating
Last 5 years
Margin
After-tax ROC
Average effective tax rate
31
66
35
46
54
11
375
86
36
232
42
18
18
32
73
19
181
68
123
199
66
33
20
17
15
60
99
30
67
36
61
225
104
10
6
28
19
21
25
53
26
25
122
29
31
66
145
16
55
82
51
4.60%
12.33%
6.51%
7.48%
0.90%
9.66%
0.00%
0.00%
3.24%
23.92%
4.86%
8.74%
-6.24%
9.02%
11.69%
5.79%
10.34%
-0.77%
11.32%
23.48%
13.83%
3.59%
-2.25%
-9.80%
-5.02%
-2.61%
5.20%
13.10%
9.04%
5.45%
16.24%
19.02%
6.58%
-9.48%
6.73%
2.97%
7.12%
3.93%
14.61%
15.36%
7.33%
7.68%
6.30%
10.26%
0.00%
4.96%
18.48%
32.20%
3.33%
3.47%
-7.04%
11.44%
9.99%
8.04%
10.70%
6.88%
6.55%
NA
NA
20.46%
22.27%
0.55%
19.14%
14.15%
15.73%
11.66%
10.20%
26.93%
15.88%
13.18%
25.65%
12.17%
12.70%
18.58%
20.00%
16.88%
6.74%
5.97%
5.19%
21.64%
14.84%
14.23%
48.76%
9.23%
4.56%
14.72%
6.84%
13.68%
10.87%
-17.62%
15.20%
16.93%
3.15%
10.23%
19.64%
NA
NA
14.24%
32.79%
13.66%
12.51%
10.84%
11.59%
18.08%
16.80%
14.62%
14.06%
6.10%
NA
NA
13.87%
16.57%
-0.38%
11.44%
15.30%
15.21%
14.17%
7.65%
25.52%
29.07%
8.83%
16.78%
9.11%
25.71%
6.29%
5.45%
6.45%
4.41%
12.06%
13.83%
11.79%
14.97%
7.15%
11.19%
12.40%
6.75%
8.41%
10.10%
10.00%
15.04%
-17.93%
10.23%
14.72%
11.69%
7.45%
12.07%
NA
NA
25.22%
93.10%
28.42%
11.76%
3.33%
16.81%
23.03%
26.03%
18.85%
17.88%
17.79%
17.91%
21.88%
17.04%
2.63%
11.27%
20.75%
21.56%
21.15%
15.52%
9.47%
13.43%
7.63%
20.27%
5.89%
10.24%
21.44%
28.85%
31.06%
28.24%
16.78%
11.65%
19.88%
14.87%
11.45%
10.82%
16.74%
21.85%
31.10%
27.80%
19.54%
18.01%
20.13%
7.09%
14.48%
23.88%
25.63%
20.04%
17.00%
20.49%
12.62%
11.27%
21.82%
18.61%
24.47%
5.99%
Med Supp Invasive
Med Supp Non-Invasive
Medical Services
Metal Fabricating
Metals & Mining (Div.)
Natural Gas (Div.)
Natural Gas Utility
Newspaper
Office Equip/Supplies
Oil/Gas Distribution
Oilfield Svcs/Equip.
Packaging & Container
Paper/Forest Products
Petroleum (Integrated)
Petroleum (Producing)
Pharmacy Services
Pipeline MLPs
Power
Precious Metals
Precision Instrument
Public/Private Equity
Publishing
R.E.I.T.
Railroad
Recreation
Reinsurance
Restaurant
Retail (Hardlines)
Retail (Softlines)
Retail Automotive
Retail Building Supply
Retail Store
Retail/Wholesale Food
Securities Brokerage
Semiconductor
Semiconductor Equip
Shoe
Steel
Telecom. Equipment
Telecom. Services
Telecom. Utility
Thrift
Tobacco
Toiletries/Cosmetics
Trucking
Water Utility
Wireless Networking
74
127
106
25
71
30
26
12
18
11
80
26
29
28
168
16
62
92
74
76
20
21
131
13
53
12
67
69
41
19
10
36
32
30
136
10
12
32
91
61
24
170
11
15
31
9
53
1.14%
11.25%
8.35%
0.74%
2.64%
-4.25%
-7.97%
2.29%
0.49%
-2.80%
14.20%
2.70%
5.05%
20.39%
7.01%
13.34%
-1.75%
-2.13%
14.61%
-3.49%
14.68%
-3.12%
-5.51%
12.09%
10.80%
0.00%
1.40%
10.42%
7.33%
11.71%
8.37%
8.73%
10.91%
-4.90%
-4.41%
2.12%
5.03%
1.11%
1.39%
6.10%
0.01%
0.00%
20.51%
4.78%
1.26%
4.44%
11.83%
23.03%
7.77%
10.56%
13.69%
24.25%
18.59%
11.95%
13.30%
6.97%
12.54%
16.01%
9.62%
8.71%
10.63%
24.23%
4.76%
8.65%
7.75%
31.98%
16.03%
33.10%
8.10%
80.18%
29.50%
12.22%
NA
16.31%
8.70%
10.85%
6.83%
9.34%
5.53%
3.78%
32.05%
18.28%
10.34%
11.18%
2.99%
-0.15%
19.86%
15.94%
NA
23.01%
10.51%
7.85%
27.63%
7.57%
16.28%
19.25%
13.73%
13.72%
13.22%
5.47%
6.31%
12.66%
10.97%
6.46%
9.70%
11.37%
8.49%
12.64%
11.54%
8.27%
7.70%
3.17%
8.98%
13.41%
13.90%
8.55%
12.59%
12.36%
9.17%
NA
19.44%
14.89%
35.44%
9.54%
16.18%
13.70%
11.65%
5.43%
18.03%
9.54%
26.04%
2.14%
-6.38%
12.19%
9.15%
NA
33.57%
17.09%
12.48%
6.15%
4.09%
15.02%
11.14%
18.76%
16.65%
11.84%
19.04%
25.74%
29.11%
22.90%
17.33%
19.53%
23.58%
12.27%
30.70%
13.09%
23.64%
5.50%
8.99%
10.50%
13.41%
20.12%
23.36%
0.50%
30.96%
20.89%
6.53%
22.49%
23.83%
26.53%
32.89%
24.71%
23.46%
29.85%
24.32%
11.02%
20.20%
23.43%
26.96%
17.41%
17.82%
19.76%
16.03%
33.51%
29.96%
27.33%
34.28%
11.06%
Unlevered Beta
Equity (Levered)
Cost
Beta
of equity
Std deviation in stock pricesPre-tax cost of debt
1.13
0.87
0.92
1.17
1.50
1.14
0.62
0.86
0.71
1.27
1.28
0.71
1.20
1.24
1.03
0.89
0.90
1.29
0.88
0.99
0.82
0.85
0.35
0.26
0.37
1.34
1.10
1.15
1.18
1.33
0.34
0.95
0.76
1.15
0.81
1.33
1.08
1.46
1.40
1.14
0.86
1.50
0.68
1.02
1.66
0.81
1.02
1.47
0.94
1.09
0.71
1.30
0.92
1.07
1.20
1.66
1.70
0.88
0.95
0.81
1.24
1.69
0.96
1.32
1.32
1.13
1.44
0.85
1.28
1.15
1.04
0.82
0.78
0.55
0.39
0.54
1.35
1.14
1.10
1.33
1.06
0.45
1.19
0.85
1.11
1.01
1.39
1.07
1.79
1.79
1.49
0.94
1.47
0.93
1.14
1.62
0.81
0.95
1.19
0.90
1.19
1.48
9.54%
7.62%
8.37%
9.06%
11.35%
11.52%
7.45%
7.80%
7.08%
9.22%
11.50%
7.83%
9.63%
9.62%
8.71%
10.26%
7.28%
9.45%
8.79%
8.25%
7.13%
6.93%
5.77%
4.99%
5.76%
9.77%
8.74%
8.56%
9.71%
8.35%
5.31%
8.98%
7.29%
8.57%
8.11%
10.01%
8.37%
12.01%
11.98%
10.47%
7.75%
10.40%
7.68%
8.73%
11.14%
7.09%
7.77%
9.01%
7.56%
8.99%
10.46%
83.02%
44.75%
63.96%
67.00%
51.50%
49.51%
43.18%
32.12%
47.98%
83.67%
76.77%
37.32%
38.16%
44.72%
60.60%
46.07%
67.14%
77.26%
57.21%
84.78%
72.45%
81.04%
14.80%
13.08%
14.11%
67.15%
75.34%
56.11%
61.01%
49.47%
77.98%
54.62%
51.38%
29.83%
25.91%
45.61%
54.31%
39.16%
41.47%
58.46%
40.37%
50.44%
58.23%
55.92%
29.38%
27.38%
90.80%
66.00%
51.20%
47.09%
75.61%
5.54%
4.04%
4.54%
5.04%
4.54%
4.04%
4.04%
4.04%
4.04%
5.54%
5.04%
4.04%
4.04%
4.04%
4.54%
4.04%
5.04%
5.04%
4.54%
5.54%
5.04%
5.54%
3.54%
3.54%
3.54%
5.04%
5.04%
4.54%
4.54%
4.04%
5.04%
4.54%
4.54%
4.04%
4.04%
4.04%
4.54%
4.04%
4.04%
4.54%
4.04%
4.54%
4.54%
4.54%
4.04%
4.04%
6.04%
5.04%
4.54%
4.04%
5.04%
Market Debt/Capital
26.35%
16.46%
30.31%
8.57%
18.11%
46.62%
45.74%
24.39%
18.12%
11.16%
30.25%
35.25%
18.89%
14.84%
16.36%
43.67%
7.05%
7.89%
37.79%
11.62%
7.30%
12.53%
44.44%
44.17%
41.24%
10.49%
15.50%
10.59%
16.95%
6.01%
28.42%
35.09%
17.03%
24.76%
28.09%
12.04%
7.71%
29.49%
35.22%
30.65%
13.70%
8.33%
37.91%
16.06%
26.98%
17.91%
2.34%
5.35%
5.29%
16.62%
57.16%
0.92
0.87
0.73
1.31
1.22
1.04
0.40
1.90
0.94
0.67
1.29
0.87
0.93
1.01
1.23
0.90
0.41
0.73
0.73
1.08
1.58
0.92
0.98
1.24
1.15
0.90
0.94
1.60
1.33
1.04
1.10
1.05
0.68
0.80
1.44
1.88
1.39
1.22
1.27
0.90
0.47
0.79
0.81
0.97
1.19
0.31
0.93
0.97
0.88
0.91
1.41
1.39
1.29
0.56
2.01
1.14
1.01
1.47
1.09
1.17
1.07
1.48
1.00
0.56
1.50
0.83
1.12
1.67
1.13
1.35
1.40
1.37
0.81
1.00
1.68
1.27
1.27
1.17
1.18
0.78
1.18
1.38
1.73
1.32
1.66
1.05
1.05
0.77
0.69
0.88
1.03
1.40
0.45
1.18
7.87%
7.45%
7.60%
10.07%
9.98%
9.51%
5.83%
13.08%
8.72%
8.11%
10.37%
8.48%
8.91%
8.38%
10.42%
8.05%
5.85%
10.53%
7.19%
8.65%
11.40%
8.70%
9.77%
10.03%
9.87%
7.08%
8.04%
11.44%
9.41%
9.40%
8.90%
8.95%
6.95%
8.95%
9.93%
11.71%
9.62%
11.36%
8.27%
8.30%
6.87%
6.51%
7.45%
8.18%
10.05%
5.27%
8.96%
55.16%
62.14%
72.79%
57.52%
82.87%
43.11%
29.29%
42.63%
56.56%
37.38%
53.47%
44.69%
43.52%
47.09%
72.91%
55.91%
22.33%
88.17%
66.24%
57.51%
33.66%
54.21%
29.77%
32.21%
46.18%
20.86%
53.50%
52.44%
56.84%
36.44%
28.59%
40.98%
30.14%
43.92%
49.52%
36.83%
49.98%
39.65%
61.81%
62.49%
41.97%
34.84%
30.12%
38.40%
42.67%
14.75%
62.14%
4.54%
4.54%
5.04%
4.54%
5.54%
4.04%
4.04%
4.04%
4.54%
4.04%
4.54%
4.04%
4.04%
4.04%
5.04%
4.54%
3.54%
5.54%
5.04%
4.54%
4.04%
4.54%
4.04%
4.04%
4.04%
3.54%
4.54%
4.54%
4.54%
4.04%
4.04%
4.04%
4.04%
4.04%
4.04%
4.04%
4.04%
4.04%
4.54%
4.54%
4.04%
4.04%
4.04%
4.04%
4.04%
3.54%
4.54%
12.93%
9.09%
31.09%
15.91%
19.45%
26.18%
37.22%
16.94%
31.65%
39.32%
20.69%
28.58%
27.43%
17.47%
21.52%
15.78%
29.46%
57.27%
25.52%
13.23%
21.60%
26.84%
30.52%
17.33%
23.96%
13.79%
11.67%
11.18%
4.77%
28.17%
9.81%
18.54%
23.34%
63.94%
9.85%
11.65%
3.79%
38.89%
11.02%
25.17%
47.08%
8.01%
16.33%
15.71%
23.56%
40.25%
28.78%
Cost of capital
Sales/Capital
EV/Sales
EV/EBITDA
EV/EBIT
Price/Book
Trailing PE
7.90%
6.77%
6.66%
8.54%
9.78%
7.28%
5.15%
6.49%
6.24%
8.56%
8.94%
5.92%
8.27%
8.56%
7.73%
6.84%
6.98%
8.95%
6.50%
7.67%
6.83%
6.47%
4.15%
3.73%
4.26%
9.06%
7.85%
7.95%
8.52%
8.00%
4.66%
6.79%
6.52%
7.05%
6.51%
9.10%
7.93%
9.18%
8.61%
8.10%
7.02%
9.76%
5.80%
7.76%
8.79%
6.25%
7.67%
8.69%
7.31%
7.90%
6.21%
1.39
2.67
2.72
1.92
2.53
1.32
NA
NA
0.86
0.93
1.07
0.86
1.42
1.38
1.70
0.87
1.26
2.45
0.86
0.82
1.00
3.30
0.49
0.40
0.51
1.46
2.68
3.76
0.79
1.27
0.76
0.32
1.78
2.23
0.85
1.94
1.11
1.95
0.94
0.81
1.19
6.09
1.04
0.83
NA
NA
2.29
3.59
2.79
1.32
0.36
1.67
1.31
1.01
2.08
0.93
0.98
NA
NA
3.59
8.17
1.64
2.62
1.59
2.07
1.71
1.40
4.09
1.67
2.18
4.06
6.01
1.02
2.61
3.09
2.46
1.91
0.83
0.61
3.31
1.96
2.36
5.48
1.40
0.54
2.24
1.34
4.74
1.14
1.84
3.10
2.65
0.52
1.56
4.05
NA
NA
5.57
3.05
2.13
1.92
2.99
10.91
10.54
7.89
15.70
9.56
8.76
5.40
5.43
14.36
28.37
26.98
8.03
8.37
10.11
10.92
6.97
12.98
8.69
12.68
11.84
30.97
5.95
8.51
9.56
8.32
18.40
9.61
9.17
12.88
10.01
10.35
10.58
12.04
5.39
11.69
14.07
21.11
8.23
NA
13.81
13.13
13.14
11.24
14.48
1.51
299.00
27.77
8.17
12.62
11.60
12.20
14.64
13.08
12.56
19.42
13.48
15.02
5.40
5.43
17.56
36.70
298.53
13.68
11.25
13.16
14.68
13.73
15.20
10.53
16.55
15.82
49.33
8.02
14.04
15.46
14.60
28.29
13.95
11.81
15.27
13.18
16.55
11.24
15.15
11.74
15.25
19.64
34.62
10.51
NA
20.37
15.63
16.57
15.25
20.62
1.51
301.42
39.09
9.31
15.60
15.31
27.61
3.24
4.58
5.00
4.60
2.90
1.59
1.21
1.59
4.79
6.46
2.42
5.24
2.76
3.47
3.91
1.43
4.28
4.06
2.91
3.85
6.33
2.93
1.62
1.54
1.54
2.89
2.41
2.26
3.50
1.92
2.56
2.36
3.27
1.21
2.87
2.95
5.37
3.58
2.25
5.45
4.38
3.20
2.35
5.10
1.03
1.36
6.83
3.92
5.20
3.24
1.20
49.37
24.32
16.16
21.97
23.26
12.65
18.14
18.57
28.96
63.71
755.50
25.95
14.55
22.16
30.18
36.36
65.03
51.52
28.68
49.11
150.17
24.10
16.69
16.67
16.85
23.36
25.26
22.41
25.36
20.10
28.06
26.69
31.35
34.22
22.40
22.35
1058.24
19.88
25.56
37.99
21.02
26.37
37.63
214.35
14.72
17.61
149.75
22.44
36.04
27.41
33.50
7.20%
7.02%
6.18%
8.90%
8.68%
7.66%
4.56%
11.27%
6.82%
5.88%
8.79%
6.75%
7.13%
7.34%
8.83%
7.21%
4.75%
6.40%
6.13%
7.86%
9.46%
7.09%
7.53%
8.71%
8.08%
6.39%
7.42%
10.46%
9.09%
7.43%
8.27%
7.74%
5.90%
4.78%
9.19%
10.63%
9.34%
7.88%
7.66%
6.90%
4.77%
6.18%
6.63%
7.27%
8.26%
4.01%
7.17%
0.92
3.35
2.00
1.44
0.79
0.40
0.74
1.31
2.20
0.66
0.80
1.62
1.39
2.04
0.75
2.73
0.92
0.61
0.39
1.00
0.48
1.53
0.17
0.64
0.95
NA
1.72
2.55
5.21
2.17
2.71
3.68
4.53
0.27
1.20
1.19
3.14
1.15
2.05
0.92
0.79
NA
2.13
2.57
2.36
0.33
0.70
3.13
1.11
0.92
1.71
2.17
4.09
2.12
2.13
0.66
2.49
2.16
1.29
1.32
0.67
1.94
0.76
2.12
1.72
2.03
2.66
3.21
1.44
7.13
3.98
2.03
NA
2.71
1.87
1.27
1.08
1.51
0.65
0.54
4.35
2.78
2.07
2.06
0.84
1.59
2.00
1.86
NA
2.41
1.73
1.06
4.34
3.28
10.99
11.73
7.18
9.92
6.71
8.25
11.43
11.17
6.33
13.84
8.89
9.05
8.97
4.62
5.04
11.70
16.96
9.78
4.55
12.13
8.95
10.62
7.71
10.43
11.30
37.10
12.96
15.81
9.12
12.73
12.95
8.65
9.51
12.02
9.35
11.55
15.75
10.62
42.19
5.68
5.42
5.52
9.71
12.81
7.72
10.65
16.11
13.61
14.28
8.72
12.49
8.96
22.00
17.75
15.98
9.43
19.83
13.50
13.43
15.10
6.34
8.00
15.88
24.45
22.23
6.34
16.62
9.70
17.80
8.89
13.48
16.58
37.10
16.61
21.50
11.69
15.83
16.19
11.83
14.31
13.58
15.19
19.97
18.40
27.92
NA
10.05
11.68
5.52
10.48
16.48
13.47
15.69
43.41
3.32
3.92
2.55
2.88
1.93
2.00
2.30
3.48
1.67
2.71
1.99
3.35
2.46
1.44
1.62
2.48
3.18
1.11
0.77
2.96
1.62
3.52
1.26
3.60
2.53
0.92
7.29
6.80
5.72
4.47
5.64
3.24
3.78
1.35
3.12
2.28
5.11
0.94
2.40
2.25
2.38
1.32
14.45
7.13
4.02
1.97
3.95
31.42
42.85
28.01
19.53
94.26
51.23
17.95
26.37
20.21
26.58
31.86
21.90
22.48
17.57
51.32
15.14
40.98
206.85
18.03
32.15
23.33
18.78
19.03
21.75
26.53
10.51
35.82
24.22
23.20
20.02
31.29
23.95
29.78
28.12
41.18
41.76
21.06
24.37
33.44
108.85
20.70
55.55
16.95
29.82
21.22
21.52
74.73
Country
Long-Term RatingAdj. Default Spread
Abu Dhabi
Aa2
0.50%
Albania
B1
4.50%
Andorra
A3
1.20%
Angola
Ba3
3.60%
Argentina
B3
6.50%
Armenia
Ba2
3.00%
Aruba
Baa1
1.60%
Australia
Aaa
0.00%
Austria
Aaa
0.00%
Azerbaijan
Baa3
2.20%
Bahamas
Baa1
1.60%
Bahrain
Baa2
1.90%
Bangladesh
Ba3
3.60%
Barbados
Ba1
2.50%
Belarus
B3
6.50%
Belgium
Aa3
0.60%
Belize
Caa2
9.00%
Benin
B2
5.50%
Bermuda
Aa3
0.60%
Bolivia
Ba3
3.60%
Bosnia and Herzegovina
B3
6.50%
Botswana
A2
0.85%
Brazil
Baa2
1.90%
Bulgaria
Baa2
1.90%
Burkina Faso
B2
5.50%
Cambodia
B2
5.50%
Cameroon
B2
5.50%
Canada
Aaa
0.00%
Cape Verde
B2
5.50%
Cayman Islands
Aa3
0.60%
Chile
Aa3
0.60%
China
Aa3
0.60%
Colombia
Baa3
2.20%
Cook Islands
B1
4.50%
Costa Rica
Baa3
2.20%
Croatia
Ba1
2.50%
Cuba
Caa1
7.50%
Curacao
B1
4.50%
Cyprus
Caa3
10.00%
Czech Republic
A1
0.70%
Democratic Republic of CongoB3
6.50%
Total Risk Premium
5.75%
11.75%
6.80%
10.40%
14.75%
9.50%
7.40%
5.00%
5.00%
8.30%
7.40%
7.85%
10.40%
8.75%
14.75%
5.90%
18.50%
13.25%
5.90%
10.40%
14.75%
6.28%
7.85%
7.85%
13.25%
13.25%
13.25%
5.00%
13.25%
5.90%
5.90%
5.90%
8.30%
11.75%
8.30%
8.75%
16.25%
11.75%
20.00%
6.05%
14.75%
Denmark
Dominican Republic
Ecuador
Egypt
El Salvador
Estonia
Fiji
Finland
France
Gabon
Georgia
Germany
Ghana
Greece
Guatemala
Honduras
Hong Kong
Hungary
Iceland
India
Indonesia
Ireland
Isle of Man
Israel
Italy
Jamaica
Japan
Jordan
Kazakhstan
Kenya
Korea
Kuwait
Latvia
Lebanon
Liechtenstein
Lithuania
Luxembourg
Macao
Macedonia
Malaysia
Malta
Mauritius
Aaa
B1
Caa1
Caa1
Ba3
A1
B1
Aaa
Aa1
Ba3
Ba3
Aaa
B1
Caa3
Ba1
B2
Aa1
Ba1
Baa3
Baa3
Baa3
Ba1
Aa1
A1
Baa2
Caa3
Aa3
B1
Baa2
B1
Aa3
Aa2
Baa2
B1
Aaa
Baa1
Aaa
Aa3
Ba3
A3
A3
Baa1
0.00%
4.50%
7.50%
7.50%
3.60%
0.70%
4.50%
0.00%
0.40%
3.60%
3.60%
0.00%
4.50%
10.00%
2.50%
5.50%
0.40%
2.50%
2.20%
2.20%
2.20%
2.50%
0.40%
0.70%
1.90%
10.00%
0.60%
4.50%
1.90%
4.50%
0.60%
0.50%
1.90%
4.50%
0.00%
1.60%
0.00%
0.60%
3.60%
1.20%
1.20%
1.60%
5.00%
11.75%
16.25%
16.25%
10.40%
6.05%
11.75%
5.00%
5.60%
10.40%
10.40%
5.00%
11.75%
20.00%
8.75%
13.25%
5.60%
8.75%
8.30%
8.30%
8.30%
8.75%
5.60%
6.05%
7.85%
20.00%
5.90%
11.75%
7.85%
11.75%
5.90%
5.75%
7.85%
11.75%
5.00%
7.40%
5.00%
5.90%
10.40%
6.80%
6.80%
7.40%
Mexico
Baa1
Moldova
B3
Mongolia
B1
Montenegro
Ba3
Montserrat
Baa3
Morocco
Ba1
Mozambique
B1
Namibia
Baa3
Netherlands
Aaa
New Zealand
Aaa
Nicaragua
B3
Nigeria
Ba3
Norway
Aaa
Oman
A1
Pakistan
Caa1
Panama
Baa2
Papua New Guinea
B1
Paraguay
Ba3
Peru
Baa2
Philippines
Baa3
Poland
A2
Portugal
Ba3
Qatar
Aa2
Ras Al Kaminah
A2
Republic of the Congo
Ba3
Romania
Baa3
Russia
Baa1
Rwanda
B2
Saudi Arabia
Aa3
Senegal
B1
Serbia
B1
Singapore
Aaa
Slovakia
A2
Slovenia
Ba1
South Africa
Baa1
Spain
Baa3
Sri Lanka
B1
St. Maarten
Baa1
St. Vincent & the Grenadines B2
Suriname
Ba3
Sweden
Aaa
Switzerland
Aaa
1.60%
6.50%
4.50%
3.60%
2.20%
2.50%
4.50%
2.20%
0.00%
0.00%
6.50%
3.60%
0.00%
0.70%
7.50%
1.90%
4.50%
3.60%
1.90%
2.20%
0.85%
3.60%
0.50%
0.85%
3.60%
2.20%
1.60%
5.50%
0.60%
4.50%
4.50%
0.00%
0.85%
2.50%
1.60%
2.20%
4.50%
1.60%
5.50%
3.60%
0.00%
0.00%
7.40%
14.75%
11.75%
10.40%
8.30%
8.75%
11.75%
8.30%
5.00%
5.00%
14.75%
10.40%
5.00%
6.05%
16.25%
7.85%
11.75%
10.40%
7.85%
8.30%
6.28%
10.40%
5.75%
6.28%
10.40%
8.30%
7.40%
13.25%
5.90%
11.75%
11.75%
5.00%
6.28%
8.75%
7.40%
8.30%
11.75%
7.40%
13.25%
10.40%
5.00%
5.00%
Taiwan
Thailand
Trinidad and Tobago
Tunisia
Turkey
Uganda
Ukraine
United Arab Emirates
United Kingdom
United States of America
Uruguay
Venezuela
Vietnam
Zambia
Aa3
Baa1
Baa1
Ba3
Baa3
B1
Caa1
Aa2
Aa1
Aaa
Baa3
Caa1
B2
B1
0.60%
1.60%
1.60%
3.60%
2.20%
4.50%
7.50%
0.50%
0.40%
0.00%
2.20%
7.50%
5.50%
4.50%
5.90%
7.40%
7.40%
10.40%
8.30%
11.75%
16.25%
5.75%
5.60%
5.00%
8.30%
16.25%
13.25%
11.75%
Region
Weighted Average:
Weighted
Default Spreads
Average: TRP
Weighted Average: CRP
Africa
3.36%
10.04%
5.04%
Asia
1.00%
6.51%
1.51%
Australia & New Zealand
0.00%
5.00%
0.00%
Caribbean
5.10%
12.65%
7.65%
Central and South America
2.42%
8.62%
3.62%
Eastern Europe & Russia
1.98%
7.96%
2.96%
Middle East
0.76%
6.14%
1.14%
North America
0.00%
5.00%
0.00%
Western Europe
0.86%
6.29%
1.29%
Global
0.90%
6.35%
1.35%
Country Risk Premium
Region
0.75%
Middle East
6.75%
Eastern Europe & Russia
1.80%
Western Europe
5.40%
Africa
9.75%
Central and South America
4.50%
Eastern Europe & Russia
2.40%
Caribbean
0.00%
Australia & New Zealand
0.00%
Western Europe
3.30%
Eastern Europe & Russia
2.40%
Caribbean
2.85%
Middle East
5.40%
Asia
3.75%
Caribbean
9.75%
Eastern Europe & Russia
0.90%
Western Europe
13.50%
Central and South America
8.25%
Africa
0.90%
Caribbean
5.40%
Central and South America
9.75%
Eastern Europe & Russia
1.28%
Africa
2.85%
Central and South America
2.85%
Eastern Europe & Russia
8.25%
Africa
8.25%
Asia
8.25%
Africa
0.00%
North America
8.25%
Africa
0.90%
Caribbean
0.90%
Central and South America
0.90%
Asia
3.30%
Central and South America
6.75%
Australia & New Zealand
3.30%
Central and South America
3.75%
Eastern Europe & Russia
11.25%
Caribbean
6.75%
Caribbean
15.00%
Western Europe
1.05%
Eastern Europe & Russia
9.75%
Africa
0.00%
6.75%
11.25%
11.25%
5.40%
1.05%
6.75%
0.00%
0.60%
5.40%
5.40%
0.00%
6.75%
15.00%
3.75%
8.25%
0.60%
3.75%
3.30%
3.30%
3.30%
3.75%
0.60%
1.05%
2.85%
15.00%
0.90%
6.75%
2.85%
6.75%
0.90%
0.75%
2.85%
6.75%
0.00%
2.40%
0.00%
0.90%
5.40%
1.80%
1.80%
2.40%
Western Europe
Caribbean
Central and South America
Africa
Central and South America
Eastern Europe & Russia
Asia
Western Europe
Western Europe
Africa
Eastern Europe & Russia
Western Europe
Africa
Western Europe
Central and South America
Central and South America
Asia
Eastern Europe & Russia
Western Europe
Asia
Asia
Western Europe
Western Europe
Middle East
Western Europe
Caribbean
Asia
Middle East
Eastern Europe & Russia
Africa
Asia
Middle East
Eastern Europe & Russia
Middle East
Western Europe
Eastern Europe & Russia
Western Europe
Asia
Eastern Europe & Russia
Asia
Western Europe
Asia
2.40%
9.75%
6.75%
5.40%
3.30%
3.75%
6.75%
3.30%
0.00%
0.00%
9.75%
5.40%
0.00%
1.05%
11.25%
2.85%
6.75%
5.40%
2.85%
3.30%
1.28%
5.40%
0.75%
1.28%
5.40%
3.30%
2.40%
8.25%
0.90%
6.75%
6.75%
0.00%
1.28%
3.75%
2.40%
3.30%
6.75%
2.40%
8.25%
5.40%
0.00%
0.00%
Central and South America
Eastern Europe & Russia
Asia
Eastern Europe & Russia
Caribbean
Africa
Africa
Africa
Western Europe
Australia & New Zealand
Central and South America
Africa
Western Europe
Middle East
Asia
Central and South America
Asia
Central and South America
Central and South America
Asia
Eastern Europe & Russia
Western Europe
Middle East
Middle East
Africa
Eastern Europe & Russia
Eastern Europe & Russia
Africa
Middle East
Africa
Eastern Europe & Russia
Asia
Eastern Europe & Russia
Eastern Europe & Russia
Africa
Western Europe
Asia
Caribbean
Caribbean
Central and South America
Western Europe
Western Europe
0.90%
2.40%
2.40%
5.40%
3.30%
6.75%
11.25%
0.75%
0.60%
0.00%
3.30%
11.25%
8.25%
6.75%
Asia
Asia
Caribbean
Africa
Western Europe
Africa
Eastern Europe & Russia
Middle East
Western Europe
North America
Central and South America
Central and South America
Asia
Africa
Student
SAMPLE PROJECT
Advanced Corporate Finance Sample Project: Panera Bread
INTRODUCTION:
The Panera Bread ® Company (Panera) is a national bakery-café restaurant with headquarters
Saint Louis, MO that operates 1,541 company-owned and franchise-operated bakery-cafés in fortytwo states, the District of Columbia, Ontario, Canada; Chile, Thailand, the Philippines, and
Indonesia. Panera operates under names of the Panera Bread, Saint Louis Bread Co., and Paradise
Bakery & Café and its bakery-cafés are located mostly in inner-city and suburban mall locations. The
company has three business segments: bakery-café operations, franchise operations, and fresh dough
and other product operations. (Panera Bread Company).
Panera Bread Corporation started in 1976 in Boston as Au Bon Pain, a showcase operation for
Pavallier BVP SA, a French manufacturer of commercial ovens. In 1978, the company was bought
by Louis I. Kane, who began expanding in the Boston area. Three years later, Ronald M. Shaich
joined him, and they formed a partnership called Au Bon Pain Co. In 1987 the Rosenthal family of
Kirkwood, Missouri started a bakery-café in which they used a sour dough baking method to produce
what they called “St. Louis Bread.” The company expanded slowly, and seven years later they had
only five stores. But in 1993 St. Louis Bread started to franchise and quickly expanded to twenty
bakery-cafés. As a result, the firm appeared on Inc. magazine's list of the five hundred fastestgrowing companies in the U.S (Panera Bread Company).
On June 6, 1991, Au Bon Pain went public, made its initial public offering (IPO), and continued
its growth through expansion of its operations and acquisitions. This company, the future Panera
Bread, made an initial public offering announcing 2.5 million Class A common shares through
Morgan Stanley & Co. Inc. and Montgomery Securities, as managers of the underwriting group. Au
Bon Pain offered 1.5 million shares, and additional 1 million were offered to some preferred
investors. During its debut, 1.875 million new shares were sold at $9 per share, but the price grew to
over $13 by that fall of 1991. Au Bon Pain was quoted on the NASDAQ National Market System
under the symbol ABPC. Net proceeds from the sale of the Class A common stock were used to
repay long-term and bank debt.
At the time of the initial IPO, Au Bon Pain was a Boston-based chain of 92 bakery cafés, 73
of which were company-operated and 19 of which were operated by franchisees. The proceeds were
used to fund a series of acquisitions such as the 1992 acquisition of Warburton’s Bakery Café, Inc., a
chain of over 100 units in Chicago, Pittsburgh and Boston with price tag of $16 million. The 1993
acquisition of Saint Louis Bread Co. cost $24 million ("Au Bon Pain to go public", 1991).
Prior to this acquisition, Au Bon Pain had performed well in upscale urban markets but struggled
to conquer the suburban family market. Ron Shaich, the Founder and Executive Chairman of the
Board of the Panera Bread Company, recalls the 1993 merger that changed the destiny of both
companies: “Our investment bankers asked me to meet the owners of [the Midwestern sandwich
chain] St. Louis Bread Co., who were struggling about whether to franchise or not. I realized this
would be a gateway to the suburban marketplace for Au Bon Pain. So we bought it for $23 million
[and renamed it Panera]” (DeBaise, 2011). At the time of the merger, St. Louis Bread owned and
operated nineteen bakery-cafés and one franchised outlet. St. Louis Bread bakery-cafés kept this
name in Missouri; however, everywhere else, they took a different name--Panera Bread. (Panera
Bread Company).
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The next major step for the Panera Bread Company happened in August 1998, when the company
decided to sell its Au Bon Pain Division for $72 million to Bruckmann, Rosser, Sherrill & Co. LP., a
New York investment firm, who also owned many other restaurant chains such as California Pizza
Kitchen, Inc., Corner Bakery Café, Not Your Average Joe's, Inc., and Bravo Brio Restaurant Group,
Inc. (Portfolio Companies, 2014). Although both Au Bon Pain and Saint Louis Bread used the same
basic menu and concept, the new member differed from its parent corporation in both its locations
and its target customer base. Saint Louis Bread was concentrated more in suburban areas and had a
more family-oriented clientele. Through this acquisition, Au Bon Pain hoped to penetrate two
previously under-exploited markets: the suburbs and the Midwest. But it was hard to do in practice,
so in 1999, the company decided to sell all of Au Bon Pain Co., Inc.'s business units, which were
more upscale, quick-service café niche concept. The company decided to follow Panera Bread’s
concept with menu including freshly baked goods, made-to-order sandwiches, soups, salads and
premium café beverages, which were similar to what we see today. By the time of sale, the Panera
Bread/St. Louis Bakery Company had entered many new markets, continued to grow, and soon
opened fifty-one company-owned bakery-cafés and forty- four franchise-operated units. In 1992, the
company also began branching into foreign markets. (Panera Bread Company).
LETTER TO THE SHAREHOLDER (Company, 2013):
In their annul letters to shareholders published on April 22, 2014, the Panera Bread Company,
declared that 2013 was another successful and productive year for the company because its earnings
per share (EPS) grew 16%, the market cap was approximately $5 billion by the end of the year,
which was a roughly $3.3 billion increase over the past five years; and they recorded 39.8%
compound annual growth. Panera believes that this strong financial performance was a result of
strategic investments, especially those that improved the customer experience and the quality of their
food. Because of these changes, average unit volumes have grown from $1.6 million annually in
2000 to roughly $2.5 million as of 2013 (Company, 2013).
The CEO stated that Panera’s current strategic plan was introduced in 2010, when the
company decided that to maintain continued growth they have to invest in technology, as part of a
holistic and comprehensive plan to provide an even better experience for their guests. Since 2013,
this comprehensive vision for Panera’s future began to take form, and it is now called Panera 2.0.
The company is focused on the total quality management pattern to drive the operational integrity of
their cafés. And they are focused on growth and continue to develop new growth platforms for
Panera (Company, 2013).
Key Initiatives of 2014 highlight the potential they see in their business. In 2014, the
company is focused on improving Panera’s competitive position, on expanding growth opportunities,
on ensuring the necessary capabilities to improve their competitive position, on expanding growth
opportunities, and finally on delivering Panera’s 2014 financial plan. The future of Panera lies with
providing their customers a better alternative than their competitors (Company, 2013).
Panera 2.0 focuses on a digital future like a new app that is an integrated and comprehensive
solution which brings together new capabilities for digital ordering, payment, operations, and,
ultimately, consumption. The first Panera 2.0 café was opened in Boston in 2012, but since then they
have opened 13 other test cafés, which have showed them that Panera 2.0 works – for the café
managers, for associates and for Panera customers, generating store sales that were among the
highest for the company in 2013. Panera 2.0’s Rapid Pick-Up and Mobile Order app with payment
capabilities to better serve “to go” customers, are expected to be available for the all café system by
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the end of 2014. Panera has made a second critical improvement to their competitive position through
operational excellence by delivering the following to their guests: speed, accuracy, clean and wellmaintained cafés, and kindness. The third improvement is ongoing innovations to food, environment,
and marketing. For instance, they announced flatbreads as a new food choice on the Panera menu as
a part of a new more robust “snacking” platform. Through these food innovations together with their
new menu boards and a number of other initiatives, they will amplify their “barbell pricing”
structure. In 2013, they continued to develop their loyalty program MyPanera® to provide a more
“personalized” experience for their guests and increase sales. Also, Panera plans to execute a more
aggressive marketing strategy in 2014 that both reinforces their brand’s differentiation and seeks to
boost market share, by launching the first national advertising campaign for broadcast television
(Company, 2013).
Panera CEO Ron Shaich plans to make new investments to ensure expanded opportunities for
growth such as opening between 115 and 125 additional new high-return locations in 2014. They are
also trying to expand to high-traffic urban location by prototyping cafés designed to handle the
volume that comes with high intensity, which would require new processes around baking and dough
production. Another 2014 innovation is redesigning the “Panera-to-You™” delivery system. The
success of this strategy depends on the reinvention of delivery hubs (formerly known as catering
hubs). By the end of 2014, the company expects to have delivery hubs in place serving more than
10% of the company cafés. All these changes will require the necessary capabilities if they’re to
deliver on the promise of these initiatives. Financial investments will be necessary, but Information
Technology used to be a major cost expense; whereas right now IT functions as a potentially
powerful competitive advantage tool and has a critical impact on the business. It serves as a barrier
to entry against other restaurants that don’t offer guests technology-enabled solutions. But everything
comes with a price and by the end of 2014, they expect to have spent roughly $42 million on the
technology and infrastructure required to live in our digital future (Company, 2013).
BIOGRAPHY OF THE CEO
The current Chief Executive Officer of Panera Bread, Ronald Mark Shaich, is also a
Chairman and one of its founders. He is 60 years old and a Boston native, who holds a Bachelor of
Arts degree in psychology from Clark University and a Master of Business Administration degree
from Harvard Business School. His successful business career started when, as he was a student at
Clark, he opened a successful convenience store for students. After getting his MBA, he worked as
an assistant to the president of Store 24, Inc. and then as an assistant to the vice president of
marketing at CVS Stores.
Shaich’s career in the bakery industry started when he got a job as the regional manager of the
Original Cookie Company and also opened his Cookie Jar bakery shops in Massachusetts. Then his
path crossed with the original Au Bon Pain, a company started by a French oven manufacturer, which
supplied bread for his Cookie Jar. Soon Shaich learned that the investor group that owned Au Bon
Pain was ready to sell all three existing stores; he saw great opportunity and convinced a real estate
investor, Louis I. Kane, to become his partner in this business venture; and his journey with this
company, which would span three decades, started. .
From the beginning, Shaich was determined to change the way America eats, and his idea informed
the successful restaurant concepts of Au Bon Pain and Panera Bread. Shaich changed the causal
restaurant industry by offering an alternative to fast food – handmade, artisan food served in warm
and welcoming environments suitable for young people and families. Shaich confessed in an
interview with St. Louis Post–Dispatch that “[w]e’ve been considered the poster child for the
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collapse of McDonald’s; […] It's so ludicrous. McDonald's problems were created 10, 15 years
ago.… They focused too much on convenience and not on the food people want” (Nicklaus, 2014).
Under Shaich’s leadership, Panera Bread serves more than eight million people each week, employs
over 80,000 associates, and is ranked number five in the foodservice category on Fortune’s “World’s
Most Admired Companies” list. Shaich was awarded the 2011 MUFSO Pioneer Award for his
contribution to the history of the foodservice industry. He was also awarded in the IFMA’s Gold
Plate Award as an outstanding leader in the industry in 2005. Further, he received the Nation’s
Restaurant News Golden Chain Award twice, and he has also been a national finalist for Ernst &
Young’s Entrepreneur of the Year. As the Company’s Chairman and CEO, Shaich promotes a variety
of tech innovation and strategic initiatives for Panera Bread. Shaich I a remarkable entrepreneur who
grew his business from zero into a national chain of nearly 1,800 bakery-cafés all around the United
States and internationally, and who is still is committed to improving it over the long term (Panera
Bread Company).
MERGERS AND ACQUISITIONS
In 2007, Panera Bread acquired Paradise Bakery & Café®, a Phoenix-based chain with over
seventy locations in ten west and southwest states. This is the classic example of a horizontal merger
between two chains which were once competitors. When Panera purchased 51% interest in the
Scottsdale-based Paradise Bakery & Café, both companies were able to benefit from this operating
merger. Paradise Bakery & Café President David Birzon remembers the merger: “We still see
ourselves as the bakery-café leader in terms of quality. Before becoming involved with Panera, we
would describe ourselves as an upscale version of Panera. We’ve always thought our baby was a little
bit better looking…There’s a great synergy between our companies in that we give them the
opportunity to compete in smaller markets, too.” Panera Bread Co. decided to keep Paradise Bakery
& Café as a separate entity, even after they bought the remaining 49 percent of the company in
December 2008. (Paradise Bakery & Café, 2014).The most recent acquisition occurred on April 9,
2013 when Panera Bread Co. acquired The Florida Bakery-café for the purchase price of $2.7
million. According to the United States Securities and Exchange Commission, great synergy is
expected from cost savings opportunities. Panera Bread stocks are also affected by other companies’
mergers. For example in 2010 when Starbucks' announced its accusation of La Boulange, the parent
company of Bay Bread, Panera’s stock went down by 1.6%, and Starbucks gained 2.4%. Since
Panera Bread is operating in a highly competitive restaurant market, the main challenge for Panera
Bread Co is to determine how the company can continue to achieve high growth rates in the future
and which mergers and acquisition are high and generate the most synergy ("Business Case: Panera
Bread Company", 2014).
BANKRUPTCY
Panera Bread Co. has recently been defended in a few lawsuits:
• A September 12, 2013 class action lawsuit was filed in Cleveland's Ohio federal district court
for allegedly violating the Fair Labor Standards Act and the Ohio Minimum Fair Wages Standards
law.
• On July 26, 2013 in Boston, Massachusetts, an individual lawsuit was filed for wrongful
termination and racial and disability discrimination (the employer seems to have strong case against
former employee for missing shifts and inability to perform duties). This case will be heard in the
front of a judge this fall.
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• In April, 2011 Panera Bread was subject to Shareholder Derivative Litigation by shareholders
who were damaged by, among other things, Panera’s overly aggressive expansion strategy. This case
was favorably resolved in in April of 2011 and since then Panera Bread has been maintaining of
mutually satisfactory relations with its controlling shareholder.
None of these lawsuits could force Panera Bread into bankruptcy. Shares of Panera Bread
(NASDAQ:PNRA) have fallen by 13% so far in 2014, but they are still at $157.43 as of June 9, 2014.
This decrease is the result of the company’s weak first-quarter earnings. The company reported
declining sales growth and margin contraction that resulted in a decline in profits. The company is
not opening as many stores in 2014 as it has in the past, and it is also not growing its store sales as
rapidly as it did in previous years. However, analysts are still relatively optimistic. They are
expecting shares to keep the average price target at about $175 per share, which is more than 10%
above than the current average share price on the market price of $158 per share.
Panera is suffering from a variety of problems, but the company is far from a risk of bankruptcy,
even if they have to pay off lawsuits.
LEASING AGREEMENTS:
Panera Bread Co., like most stores, has a lot of leases, both capital and operating. The
company leases nearly all of its bakery-cafe locations and all of its fresh dough facilities. Lease
terms for bakery-cafe and support center leases involve the initial non-cancelable lease clause plus
one renewal option period, usually for 15 years. Terms for most fresh dough facility leases also
have the initial non-cancelable clause plus the option of one or two renewal periods of 20 years
each. Panera’s lease terms generally require them to pay a proportional share of real estate taxes,
insurance, common area maintenance, and other operating costs. Many bakery-cafe leases have
provisions for contingent rental or percentage rent payments when sales exceed specified
amounts. Certain lease agreements involving the company provide for scheduled rent increases
during the lease term or for rental payments commencing at a date other than the date of initial
occupancy.
Fresh dough is the key to Panera’s high-quality, artisan bread; and fresh produce is essential to
their quality salads and sandwiches. They distribute fresh dough and produce through a leased fleet
of temperature controlled trucks operated by our associates. As of December 31, 2013, Panera leased
220 trucks. The optimal maximum distribution range is approximately 300 miles; however, when
necessary, the distribution ranges may be up to 500 miles (Form 10-K for Panera Bread Co, 2014).
Panera Bread Co., like most retailers, has a lot of leases, and therefore its financial position is far
weaker than could be guessed from GAAP financial statements. Operational leases and purchase
commitments produce hidden debt. At the end of 2013, the company had $1.6B of hidden debt
(Grosso, 2014).
Table 1: Panera Bread Leases
Less than 1
year
1-3 years
3-5 years
More than 5
years
Total
Operating leases
$134,614
$264,561
$254,616
$676,126
$1,329,917
Capital lease obligations
$500
$1,013
$1,033
$3,602
$6,148
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Purchase obligations
$271,354
$44
---
---
$271,398
Uncertain tax positions
$554
$1,140
$590
$455
$2,739
Total
$407,022
$266,758
$256,239
$680,183
$1,610,202
VALUATION MODEL-PART 1:
Table2: Valuation Part 1
Valuation of Panera Bread
Present Value of FCFF in high growth phase
$227,502,141
Present Value of Terminal Value of Firm
$3,100,601,275
Value of operating assets of the firm
$2,873,099,134
Value of Cash, Marketable Securities & Non-operating assets
$125,245,000
Value of Firm
$2,747,854,134
Market Value of outstanding debt
$1,685,239,160
Minority Interests
Market Value of Equity
Value of Equity in Options
Value of Equity in Common Stock
Market Value of Equity/share
$0
$4,433,093,293
$0
$4,433,093,293
$160
Assumptions are presented in Appendix Table 4A. All calculations are based on K-10 from
2013 as of December, 31, 2013, and they are available in Appendix Table 1-3A. The effective tax
rate is 37.27%. The company reported the previous year revenue for 2013 as $2,385,002,000, and
EBIT $309,756,000. Book value of debt is adjusted to include operational leases as a real debt of
$1,716,019,686.33. Market price per share is set up as $176.69 as of December, 2013. The risk free
rate is 3%, and it is taken from ThatsWacc.com
As of today, July 28th, 2014, the price of Panera Bread stock is $143.35 per share, but the
Valuation-Model-calculated-price is $160, which appears to be fairly valued. The model determines
the value of Panera Bread by analyzing the company’s fundamentals such as S27,672,839 Shares
Outstanding, a Reinvestment Rate of 1%, and a Return on Capital of 18.81%--as well as by
examining other financial indicators. Panera Bread Company is at this time projected to have a value
of $2,747,854,134 with market capitalization of $4,433,093,293, debt of $1,685,239,160, and cash on
hands of $125,245,000. This company had not issued any dividends in recent years. Valuation results
are very close to that of Guru Focus (Panera Bread Co Inc, 2014), but these are only estimates and
they may be inaccurate because they take only a few variables into consideration.
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VALUATION MODEL-PART 2:
Table 3: Panera Debt Analysis
Debt to Stock Price Ratio
Debt %
Market Value of Equity/share
0%
$122.19
10.0%
$130.14
20.0%
$138.73
30.0%
$148.02
40.0%
$158.07
50.0%
$168.97
60.0%
$180.78
70.0%
$193.60
80.0%
$207.52
90.0%
$222.65
100.0%
$239.11
Panera Bread currently holds about $125,245,000 in cash and also has positive cash flow
from operations, but the company currently holds $480,970,000 in liabilities with a Debt to Equity
(D/E) ratio of 0.01, which may suggest the company is not taking enough advantage of borrowing
and the price of stock suffers as result. Even if Operating Leases are calculated as liabilities, Panera
Bread Company has a relatively low amount of debt. Panera debt analysis presented in Table 3 and
graph below indicates that Panera Bread stock prices would increase if the company decided to use
more debt. The highest price is observed at 100% of debt. Panera recently announced a buyback
authorization for $600 million or about 15% of shares, and the company has also secured a five-year
$100-million-term loan from Bank of America, Wells Fargo and TD Bank with a variable interest
rate that is currently around 1.15%. Panera Bread Company plans to use the loan for general
corporate purposes, including a range of growth initiatives such as the rollout of the Panera 2.0 instore technology initiative (Panera Bread Co Inc, 2014). “This modest amount of debt is the next
logical step in the evolution of our thinking around capital structure,” said Roger Matthews, Panera
Bread's CFO. Matthews notes, “As we continue to grow our store base, invest in expanded growth
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opportunities and return capital to shareholders through consistent share repurchase, we expect this
debt should allow us to achieve a range of objectives for shareholders. However, nothing has changed
in our commitment to maintain modest leverage on the balance sheet as well as significant financial
capacity to be opportunistic” (Yohannan, 2014).
WACC IMPACTS THE VALUE OF THE FIRM
Table 4: Calculations are made using Master Input and Valuation Model
WACC
Value of Panera
0%
$3,519,217,411
10%
$2,903,131,344
20%
$2,412,325,334
30%
$2,017,163,105
40%
$1,695,943,291
50%
$1,432,543,961
60%
$1,214,830,270
70%
$1,033,558,697
80%
$881,610,714
90%
$753,448,878
100%
$644,725,515
Maximizing the value of the firm is equivalent to minimizing the firm’s cost of capital.
Capital structure affects WACC, and therefore firm value. From results presented above, there is
obvious if WACC increases, firm value decreases; therefore, Panera should choose capital structure
to obtain minimum cost of capital and this would make the firm worth the maximum possible
amount.
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ANALYST ASSESSMENT:
VALUE LINE:
Table 5: Value Line
Value Line
Recent Price
153.15
P/E Ratio
22.4
Company’s Financial Strength
A++
Stock’s Price Stability
70
Price Growth Persistence
85
Earnings Predictability
95
Timeliness
3 (Lowered 11/1/13)
Safety
2 (Raised 12/3/10)
Technical
1 Raised 5/16/14
Beta
0.85 (1.00 = Market)
2017-19 Projections
Price
Gain
Annual Total Return
High
280
85%
16%
Low
210
35%
8%
The Value Line estimates Panera’s Financial Strength as A++ and earning predictability as
95, which is fairly high. Panera’s Timelines Rank is 3, which is a measurement of probable price
performance during the next six to 12 months, relative to other stocks. Panera’s result is in the middle
since ranks are measured from 1-highest to 5-lowest. Safety Rank measures the company’s financial
strength and the stock’s long-term price stability relative to other stocks, using the same 1 to 5
ranking system. Panera’s stocks are ranked 2, which mean that the stock is considerably less risky
than those ranked 3, 4, or 5.
The Value Line indicates that Panera Bread’s first-quarter of 2014 results were a bit better
than expected, especially because the beginning of the year was rough due to severe weather and
slightly higher-than-expected food cost inflation, but later sales went up 0.1%. Overall Margins went
down a bit because of an increase in compensation and higher investment and marketing spending.
The Value Line predicts stronger results in the second half 2014 because of recent investments in
marketing, the improvement of operations and customer service, and the addition of 115-125 new
locations this year.
The Value Line prediction of Panera’s 2015-2019 Annual Total Return is between 8-16%.
The projections for 2017-2019 suggest that PNRA will experience good capital appreciation potential
over this time, but because of stiff competition among restaurants for consumers’ dollars, earnings
predictability is uncertain (Spencer, 2014).
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MERGENT ONLINE ASSESSMENT:
Table 6: Earnings Actual and Estimated
Panera Bread Co. (PNRA)
Earnings Estimates Actual (A) and Estimated (E)
2011A
2012A
2013A
2014 E
2015 E
2016 E
Earnings Per
Share
4.65
5.89
6.68
7
8.2
9.45
Cash Flow
Per Share
7.92
9.83
0
11.57
13.41
0
Sales
1822.03
2130.06
2385
2564.65
2829.4
3188.75
Operating
Profit
225.26
0
309.76
434.84
397.72
EBITDA
305.16
373.81
416.28
434.28
485.86
548.28
Net Debt
-222.64
-297.14
0
-88.52
-182.92
-119.85
Pre Tax Profit
224.9
283
312.72
312.01
353.9
412
Mergent Online assessment takes into consideration the historical performance of Panera’s
2011-2013 earnings to predict 2014-2016 outcomes. Looking at estimated numbers, Mergent Online
predicts Panera's share price in the $210-250 range by 2017-2019 because despite decreasing gross
margins, PNRA has been able to consistently increase operating margins by 1.37% since 2004. The
Panera 2.0 strategy should also increase operating margins in the future. Based on past data and
future trends, Panera is expected to grow operating profits by 28% for the next three years, and this
number is based on the estimation that company sales will grow 5%, produces revenue of 7%, and
modest operating margin expansion.
The restaurant industry is extremely competitive; therefore, price, value, food quality,
locations, customer service, environment, and overall customer experience are extremely important
for any restaurant chain to differentiate itself from the competition and maintain current customers.
Because the financial future of the company depends on competition as well, Mergent Online
Assessment has a tool that allows for comparing Panera to its competition. Chipotle Mexican Grill is
often mentioned as Panera’s biggest competitor since both chains stand out by serving only natural
antibiotic free food. Panera must implement strong plans in these areas to maintain its competitive
advantage and loyal clientele, especially because Chipotle has very strong financial numbers
presented in the Table 7 below. These strong numbers include the Price Earnings Ratio (PE), Market
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Cap, Share Price, especially because Chipotle hires fewer people and both companies have similar
assets and liabilities, even though Panera has more liabilities and fewer assets. Panera’s ability to
successfully implement its growth plans and strategies will be important in the success of the
company’s stock price going forward. But if Panera is unable to beat its competition in a cost
effective manner, its results could be impacted. During the past few years Panera performed strongly
and outperformed average of the restaurant industry, but right now looking only at numbers, Panera
currently trades at about 21.9 times earnings, compared to the restaurant industry average of 29.4.
Panera has a PEG ratio (price to earnings in relation to its growth rate) of around 1.1, making the
stock fairly valued in comparison to its growth. Panera’s biggest competition, Chipotle, currently
trades at 56.2 times earnings and has a PEG ratio of 1.7, which means that Chipotle is trading at
nearly double its growth rate. Chipotle’s stock price may still rise, but it is not likely to increase
much since the stock has already had its major growth. Panera, on other hand, has much more room
for improvement, so Panera seems like the like a stronger investment option (Panera Bread , 2014).
Table 7: Panera Bread vs. Chipotle
Comp.
Name
Revenues
Gross
Margin
Net Income
EBITDA
Total Assets
Total
Liabilities
PE
Ratio
Market
Cap
Share
Price
Panera
2,385,002,000
22.95
196,169,000
410,973,000
1,180,862,000
480,970,000
21.33
3,739 M
143.35
Chipotle
3,214,591,000
26.59
327,438,000
630,525,000
2,009,280,000
470,992,000
59.40
20,892M
673.58
GURU FOCUS: The Guru Focus Valuation of Panera PNRA
According to Guru Focus, Fair Value of PNRA is $193.87 based on following data:
PNRA current free cash flow: Free Cash Flow Growth (%) 10 years (-1.0) 5 years (0.20) 12 moths
(44.30)
Table 8: Guru Focus
Per Share Data
Annuals (Year End)
Quarterly
Fiscal Period
December 2011
December 2012
December 2013
March 2014
Free Cash Flow
4.31
5.89
6.81
1.55
Table 9: Guru Focus Fair Value of PNRA is $193.87 based on following data
Earnings per Share
$6.81
Growth rate in the next 10 years
20%
Business predictability
4.5 out of 5
Terminal Growth Rate
4%
Years of Terminal Growth
10
Discount Rate
12%
Tangible Book Value
17.87
Growth Value
$101.49
Terminal Value
$92.38
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20%
There are many ways to evaluate a stock to determine whether it is undervalued, fairlyvalued, or overvalued, based on the most common valuation metrics: Earnings per Share, Growth
Rate, Price to Book and Price/Earnings Growth Ratio (PEG), etc. Panera is priced lower than
Chipotle (CMG). While Panera has a larger market cap of 3.9 billion, its PEG of 1.0 indicates that the
stock price is undervalued. Other metrics also show that Panera's current stock price is undervalued
relative to its competitors. If the amount of growth potential that Panera 2.0 generates is taken into
consideration, it is obvious that Panera's current stock price of around $144.65 (as of July, 29, 2014)
is rather undervalued.
Guru Focus ranks Financial Strength, which measures how strong a company’s financial
situation is, based on these factors: debt, debt to revenue ratio, and Altman Z-score. Guru Focus
estimated that Panera Bread has a Financial Strength Rank of 9, which is an indicator of strong
financial strength—meaning that the company is unlikely to fall into distressed situations (Guru
Focus, 2014).
Panera Bread Co.’s Earnings per Share Growth Rate for the quarter ending on Mar 9, 2014
was 9.40%. Panera Bread’s debt to revenue ratio for the quarter that ended in Mar. 2014 was 0.00.
Panera Bread has a decreasing Gross Margin of, on average, 15.8% per year. The asset growth rate of
20% is faster than the revenue growth rate of 10.3% over past 5 years, which indicates that the
company is getting less efficient. Revenue per share also declined. The company is planning to issue
an acceptable amount of new debt. Panera Bread has enough cash to cover all of its debt, so its
financial situation is stable (Guru Focus, 2014).
A Fair Valuation (or Current Intrinsic value) of Panera can be estimated using a Discounted
Cash Flow Model, where free cash flow is defined as operating cash flow minus capital expenditure.
Number of shares outstanding is based on the latest Q1, 2014 financial report; discount rate is
assumed to be 12%, terminal growth rate is set as 4%, and the span of terminal growth is 10 years.
Based on the Fair Valuate Calculator, Panera should have a Revenue Growth Rate of 19.60% during
the next ten years at $193.87 per share. The Fair Valuation is the most probable scenario considering
that Panera's revenue growth rate is lower than it was in previous years due to stiff competition and
the decreasing of Americans’ disposable income. Its revenue growth rate should increase once it
implements Panera 2.0. Panera's stock is clearly undervalued and the market is irrational in its
valuation, since Panera still has a lot of growth opportunities in its new menu, the new Panera 2.0
strategy, the MyPanera-loyalty program, and other innovations. Based on Guru Focus, Panera stock
will increase soon (Guru Focus, 2014) because as Warren Buffett says, “If a business does well, the
stock eventually follows” (Investopedia, 2014).
CONCLUSION:
Overall valuation of the financial strength of Panera Bread Co is encouraging for
investors. Recent financial statements of Panera Bread from the end of 2013 and the first quarter
of 2014 (Q1) show a recent descendent slide, slower growth, and potential lows based on the
Price to Book ratio, but the long-term valuation for Panera is more positive because of solid
balance sheets, favorable health trends, and strong management.
Panera’s business philosophy of selling fresh food and warm bread at reasonable price
follows the general trend in dining to scale back on upscale ingredients. Panera has a strong
12
Student
SAMPLE PROJECT
number of loyal customers , good brand recognition, and a reputation as a place serving a
modern public that appreciates free Wi-Fi and a comfortable space with fireplaces—and has no
time limit for dining. Panera Bread Co., with charismatic and visionary CEO Ron Shaich, makes
constant efforts to improve and find new growth. Recently the company unveiled plans for Panera
2.0 technology starting Q1 of 2014 to upgrade customers’ dining experience through online
ordering, an in-store kiosk ordering, an improved website, and a mobile app. This strategy, if
successful, will improve customers’ experience and the company’s financial margins.
The recent financial statements show that Panera currently has no debt, but the debt
analysis shows it would be beneficial for the company to take on some amount of debt, to pay for
technological innovations and lower the cost of capital, repurchase shares. According to Debt
Impact calculation Price of Stock is only going up when debt percentage increases and the highest
price is achieved at 100% of debt.
Past financial statements of Panera’s revenue growth over the last 10 years have been very
impressive, with a yearly average growth revenue rate of 20%. These numbers have decreased
significantly in the last 5-6 years, but this decrease is typical in business because when the
company gets bigger it becomes harder to grow aggressively in size. Panera's gross margin also
has decreased to 23%, but they have stayed steady since then. Panera's operating margins as a
measure of its efficiency have been stable for the last decade, and they are around 12%. Panera's
return on equity has been moderately good at approximately 19% and growing steadily over the
last decade, which shows that the company has ability to turn sales into income profitably over a
long time period (Panera Bread , 2014).
The major recommendation to Panera would be take advantage of the market opportunity
and expand even more in geographical regions in which the company has very little presence like
the western and the southern states. Panera's management plans involve opening 115 to 125
stores in 2014, and this is recommended strategy. Even though investments in expansion decrease
profits in short term, they are beneficial in long term. Panera also should consider international
expansion, especially to Europe, in the next 10-15 years. Overall, Panera has the brand awareness,
concept, and reputation to be able to e win the competition among casual restaurants (Panera
Bread Co Inc, 2014).
Panera’s expansion and innovations such as Panera 2.0 require upfront capital
investments, which will negatively affect the near-term earnings, and as a result, the earnings will
be lower at least for the next 6-12 months. All of that will drive the prices of Panera shares down
considerably; therefore, investors should invest in this company because overall prognostics are
great. Panera currently performs an operational transformation, so the price of shares is low, but
the company has a great business model and has been profitable for a very long time; it has a
well-known brand, a positive cash flow, and no significant debt. All presented valuations and
financial data support the argument that Panera is still considered to be a high growth company
and it is good investment.
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SAMPLE PROJECT
Works Cited
"Au Bon Pain to go public". (1991, June 7). Retrieved from Boston Globe:
http://www.highbeam.com/doc/1P2-7663437.html
"Business Case: Panera Bread Company". (2014, June 5). Retrieved from
http://www.123helpme.com/business-case-panera-bread-company-view.asp?id=164008
(2014). Retrieved from Guru Focus:
http://www.gurufocus.com/term/rank_balancesheet/PNRA/Financial%2BStrength/Panera%2BBread%
2BCo%2BInc
Chicago Sun-Times. (2014, January 9). Retrieved from How HarvesTime succeeds where Dominick’s failed:
http://voices.suntimes.com/business-2/grid/harvestime-succeeded-dominicks-failed/
Commission, U. S. (2014). Quarterly Report Pursuant To Section 13 Or 15(D) Of The Securities Exchange.
Washington DC: Commission file number: 0-19253.
Company, P. B. (2013). 2013 Annual Report to Stockholders. Sain Lois, MO.
DeBaise, C. (2011). How I Built It: Panera Serves Up Business. Wall Stree Journal, Easterm editon, B. 6.
(2014). Form 10-K for PANERA BREAD CO . SEC Fillings for PNRA.
(2014). Form 10-K for Panera Bread Co. SEC Fillings for PNRA.
Grosso, B. (2014, July 2). Seeking Alpha. Retrieved from Panera: Opportunity In The Broken Growth Story? :
http://seekingalpha.com/article/2296745-panera-opportunity-in-the-broken-growth-story
Investopedia. (2014, July 4). Retrieved from http://www.investopedia.com/free/
Labor, U. S. (2013). Bureau of Labor Statistics . http://www.bls.gov/opub/ted/2014/ted_20140305.htm.
Oxford Dictionaries. (2013, August 4). Retrieved from
http://oxforddictionaries.com/us/definition/american_english/ethics
Panera Bread . (2014, June 25). Retrieved from Mergent Online:
http://www.mergentonline.com.ezproxy.dom.edu/companydetail.php?pagetype=capitalstock&compnu
mber=66466&issueid=1&entityid=131345&type=2
Panera Bread (PNRA) . (2010, June 4). Retrieved from Seeking Alpha: http://seekingalpha.com/news/350861
Panera Bread Co Inc (NAS:PNRA). (2014, July 15). Retrieved from Gurufocus:
http://www.gurufocus.com/term/zscore/PNRA/Altman%2BZ-Score/Panera%2BBread%2BCo%2BInc
Panera Bread Co Inc. (2014, July 28). Retrieved from Guru Focus:
http://www.gurufocus.com//stock.php?symbol=PNRA
Panera Bread Company. (n.d.). Retrieved from Reference for Business-- Company Profile, Information,
Business Description, History, Background Information on Panera Bread :
http://www.referenceforbusiness.com/history2/58/Panera-Bread-Company.html
14
Student
SAMPLE PROJECT
Panera Bread Company - Company Profile, Information, Business Description, History, Background
Information on Panera Bread Company. (n.d.). Retrieved from Reference for Business :
http://www.referenceforbusiness.com/history2/58/Panera-Bread-Company.html
Paradise Bakery & Café. (2014). Retrieved from QSR Magazine:
http://www2.qsrmagazine.com/articles/ones_to_watch/106/paradise-2.phtml
Portfolio Companies. (2014, June 5). Retrieved from BRS: http://www.brs.com/port_rest.html
Reitmeister, S. (2012, June 4). Seeking Alpha. Read. Decide. Invest. Retrieved from Panera Bread (PNRA)
slips in after hours trading following Starbucks' (SBUX) announcement that...:
http://seekingalpha.com/news/350861
Spencer, M. E. (2014, May 30). Value Line Panera Bread PNRA.
Yohannan, J. (2014, June 12). Market Wired. Retrieved from Panera Bread Company Closes on $100 Million
Term Loan: http://www.marketwired.com/press-release/panera-bread-company-closes-on-100million-term-loan-nasdaq-pnra-1920221.htm
15
Student
SAMPLE PROJECT
Appendix:
Table 1 A: PANERA BREAD COMPANY
CONSOLIDATED BALANCE SHEETS (Form 10-K for PANERA BREAD CO , 2014)
(in thousands, except share and per share information)
December 31,
December 25,
2013
2012
ASSETS
Current assets:
Cash and cash equivalents
$
125,245
$
297,141
Trade accounts receivable, net
32,965
43,843
Other accounts receivable
51,637
42,419
Inventories
21,916
19,714
Prepaid expenses and other
43,064
42,223
Deferred income taxes
27,889
33,502
Total current assets
302,716
478,842
Property and equipment, net
669,409
571,754
Other assets:
Goodwill
123,013
121,903
Other intangible assets, net
79,768
88,073
Deposits and other
5,956
7,591
Total other assets
208,737
217,567
Total assets
$ 1,180,862
$ 1,268,163
LIABILITIES
Current liabilities:
Accounts payable
$
17,533
$
9,371
Accrued expenses
285,792
268,169
Total current liabilities
303,325
277,540
Deferred rent
65,974
59,822
Deferred income taxes
65,398
60,655
Other long-term liabilities
46,273
48,227
Total liabilities
480,970
446,244
Commitments and contingencies (Note 13)
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value per share:
Class A, 112,500,000 shares authorized; 30,573,851
3
3
shares issued and 26,290,446 shares outstanding at
December 31, 2013 and 30,458,238 shares issued and
28,208,684 shares outstanding at December 25, 2012
Class B, 10,000,000 shares authorized; 1,382,393 shares
—
—
issued and outstanding at December 31, 2013 and
1,383,687 shares issued and outstanding at December
25, 2012
Treasury stock, carried at cost; 4,283,405 shares at
(546,570 )
(207,161 )
December 31, 2013 and 2,249,554 shares at December
25, 2012
Preferred stock, $.0001 par value per share; 2,000,000
—
—
shares authorized and no shares issued or outstanding
16
Student
SAMPLE PROJECT
at December 31, 2013 and December 25, 2012
Additional paid-in capital
Accumulated other comprehensive (loss) income
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
196,908
(333 )
1,049,884
699,892
$ 1,180,862
174,690
672
853,715
821,919
$ 1,268,163
Table 2 A: PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share information)
For the fiscal year ended
December 31,
December 25,
December 27,
2013
2012
2011
Revenues:
Bakery-cafe sales, net
Franchise royalties and fees
Fresh dough and other product
sales to franchisees
Total revenues
Costs and expenses:
Bakery-cafe expenses:
Cost of food and paper products
Labor
Occupancy
Other operating expenses
Total bakery-cafe expenses
Fresh dough and other product
cost of sales to franchisees
Depreciation and amortization
General and administrative
expenses
Pre-opening expenses
Total costs and expenses
Operating profit
Interest expense
Other (income) expense, net
Income before income taxes
Income taxes
Net income
Earnings per common share:
Basic
Diluted
$
2,108,908
112,641
163,453
$
1,879,280
102,076
148,701
$
1,592,951
92,793
136,288
$
2,385,002
$
2,130,057
$
1,822,032
$
625,622
625,457
148,816
295,539
1,695,434
142,160
$
552,580
559,446
130,793
256,029
1,498,848
131,006
$
470,398
484,014
115,290
216,237
1,285,939
116,267
$
$
$
106,523
123,335
90,939
117,932
79,899
113,083
7,794
2,075,246
309,756
1,053
(4,017 )
312,720
116,551
196,169
8,462
1,847,187
282,870
1,082
(1,208 )
282,996
109,548
173,448
6,585
1,601,773
220,259
822
(466 )
219,903
83,951
135,952
6.85
6.81
$
$
$
5.94
5.89
$
$
$
4.59
4.55
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Student
SAMPLE PROJECT
Weighted average shares of
common and common
equivalent shares outstanding:
Basic
Diluted
Other comprehensive income
(loss), net of tax:
Foreign currency translation
adjustment
Other comprehensive (loss)
income
Comprehensive income
28,629
28,794
29,217
29,455
29,601
29,903
$
(1,005 )
$
364
$
33
$
(1,005 )
$
364
$
33
$
173,812
$
135,985
$
195,164
Table 3 A: PANERA BREAD COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the fiscal year ended
December 31,
December 25,
December 27,
2013
2012
2011
Cash flows from operations:
Net income
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization
Stock-based compensation expense
Tax benefit from exercise of stock
options
Deferred income taxes
Loss on disposals of property and
equipment
Other
Changes in operating assets and
liabilities, excluding the effect of
acquisitions and dispositions:
Trade and other accounts receivable,
net
Inventories
Prepaid expenses and other
Deposits and other
Accounts payable
$ 196,169
106,523
10,703
(8,100 )
$ 173,448
90,939
9,094
(8,587 )
$ 135,952
79,899
9,861
(4,994 )
10,356
5,764
20,334
3,995
1,351
1,789
589
475
634
(31,414 )
(16,369 )
(2,440 )
(10,995 )
161
(6,513 )
(2,183 )
(7,323 )
117
8,538
3,021
(2,186 )
(841 )
1,449
8,162
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Student
SAMPLE PROJECT
Accrued expenses
Deferred rent
Other long-term liabilities
Net cash provided by operating
activities
Cash flows from investing activities:
Additions to property and equipment
Acquisitions, net of cash acquired
Purchase of investments
Proceeds from sale of investments
Proceeds from sale of property and
equipment
Proceeds from sale-leaseback
transactions
Net cash used in investing activities
Cash flows from financing activities:
Repurchase of common stock
Exercise of employee stock options
Tax benefit from exercise of stock
options
Proceeds from issuance of common
stock under employee benefit plans
Capitalized debt issuance costs
Payment of deferred acquisition
holdback
Net cash used in financing activities
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at beginning
of period
Cash and cash equivalents at end of
period
13,372
5,868
(2,432 )
348,417
49,246
5,718
(4,005 )
289,456
19,630
6,081
3,906
236,889
(192,010 )
(2,446 )
(97,919 )
97,936
—
(152,328 )
(47,951 )
—
—
—
6,132
4,538
(188,307 )
(195,741 )
(152,194 )
(339,409 )
573
8,100
(31,566 )
4,455
8,587
(96,605 )
3,193
4,994
2,842
2,462
2,040
(107,932 )
(44,377 )
—
—
115
—
—
(4,112 )
(1,097 )
(2,055 )
—
(4,976 )
(332,006 )
(171,896 )
(19,214 )
74,501
(91,354 )
(6,659 )
297,141
222,640
229,299
$ 125,245
$ 297,141
$ 222,640
Table 4 A: Assumptions
Inputs
From Current Financials
Current EBIT =
Current Interest Expense =
Current Capital Spending
Current Depreciation & Amortization
Effective tax rate (for use on operating income)
Marginal tax rate (for use on cost of debt)
Current Revenues =
Current Non-cash Working Capital =
Panera Bread
$309,756,000
$1,053,000
$192,010,000
$106,523,000
37.27%
37%
$2,385,002,000
($125,854,000)
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Student
SAMPLE PROJECT
Chg. Working Capital =
Book Value of Debt =
Book Value of Equity =
Cash & Marketable Securities =
Market Data for your firm
Is your stock currently traded?
If yes, enter the following:
Current Stock Price =
Number of shares outstanding =
($30,015,000)
$1,716,019,686.33
$699,892,000
125,245,000
Yes
176.69
27,672,839
Market Value of Debt =
If no, enter the following
Would you like to use the book value debt ratio?
If no, enter the debt ratio to use in valuation
No
0.01%
General Market Data
Long Term Risk free rate=
Risk premium for equity =
3.00%
12.93%
Ratings
Do you want to estimate the firm's synthetic rating =
If yes, choose the type of firm
If not, what is the current rating of the firm?
Enter the cost of debt associated with the rating =
Yes
1
A++
0.00%
Options
Do you have equity options (management options, warrants) outstanding?
If yes, enter the number of options
Average strike price
Average maturity
Standard Deviation in stock price
Do you want to use the stock price to value the option or your estimated value?
Valuation Inputs
High Growth Period
Length of high growth period =
Beta to use for high growth period for your firm=
Return on Capital =
Reinvestment Rate =
Do you want me to gradually adjust your high growth inputs in the second half?
Stable Growth Period
Growth rate during stable growth period =
Beta to use in stable growth period =
Risk premium for equity in stable growth period =
Debt Ratio to use in stable growth period =
Pre-tax cost of debt in stable growth period =
$0
No
0.00
$0.00
0
0%
Current Price
5
0.81
18.81%
1.00%
Yes
10.00%
1.00
7.00%
30.00%
9.00%
20
Student
Tax Rate to use in stable growth period =
SAMPLE PROJECT
37.00%
21
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