Question: 2.) Prepare and present DCF valuations and pro forma financial statements (five-year explicit period) that justify a $31 and a $56 share price. You can

2.) Prepare and present DCF valuations and pro forma financial statements

2.) Prepare and present DCF valuations and pro forma financial statements (five-year explicit period) that justify a $31 and a $56 share price. You can play with the model assumptions to get to these valuations. Propose two different business plans that would be targeting these two different outcomes. Make sure the ratios embedded in your projections conform to reasonable operating ratio assumptions in the models. Also remember that higher risk business strategies come with higher expected returns.

WOK YOW IMPORTS, INC. Enterprise (Entity) Valuation Solution [Parts A through G Chapter 14 Mini Case Percent Change in Net Sales 25.0% Percent Change in Net Sales 33.3% 20.0% 16.7% 6.0% %of 2016 Actual Pro forma 33.3% 25.0% 20.0% 16.7% Thousands of Dollars NOPAT Statements Net Sales Cost of Goods Sold Gross Proft SG&A Expenses Depreciation EBIT Percent of Net Sales Sales2016 20172018 2019 20202021 100.0% 150.0 200.0 250.0 300.0 350.0 371.0 2016 20172018 2019 2020 100.0% 100.0% 100.0% 100.0% 100.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% % 15.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 75.0100.0 125.0 150.0175.0 185.5 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 50.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% -20.0% -30.0-40.0-50.0-60.0 70.0 -5.0% -7.5-1 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 EBT Taxes (40% rate NOPAT 92.8 15.0% 45.0 Required Net Working Capital Req Cash+Receivables+Inventories Minus: Payables+Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule: Net Fixed Assets (NFA Increase in NFA Plus: Depreciation 33.3% 50.0 66.7 83.3 100.0 116.7 123.7 16.7% -33.3 7 50.0 5.361.8 33.3% 50.0 66.6 83.3 100.0 116.7 123.7 10.0 125 15.0 17.5 18.6 26.729.2317 34.2 25.5 Free Cash Flows to Entity NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows 45.0 2 17.5 26.7 9.231.734.2 -25.5 8.3 -8.3 8.3 -8.3 3.5 5.0 12.420.027.545.2 Terminal Value CF (r.18,g.06) Total Free Cash Flows (TFCF PV of TFCF (18% Discount Rate) Less: LTD Value Equity Value Value Per Share (10,000 shares 5.012.420.0403.8 233.6 3 $20.36 WOK YOW IMPORTS, INC. Enterprise (Entity) Valuation Solution [Parts A through G Chapter 14 Mini Case Percent Change in Net Sales 25.0% Percent Change in Net Sales 33.3% 20.0% 16.7% 6.0% %of 2016 Actual Pro forma 33.3% 25.0% 20.0% 16.7% Thousands of Dollars NOPAT Statements Net Sales Cost of Goods Sold Gross Proft SG&A Expenses Depreciation EBIT Percent of Net Sales Sales2016 20172018 2019 20202021 100.0% 150.0 200.0 250.0 300.0 350.0 371.0 2016 20172018 2019 2020 100.0% 100.0% 100.0% 100.0% 100.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% % 15.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 75.0100.0 125.0 150.0175.0 185.5 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% 50.0% 50.0% -20.0% -5.0% 25.0% 0.0% 25.0% -10.0% 15.0% -20.0% -30.0-40.0-50.0-60.0 70.0 -5.0% -7.5-1 25.0% 37.5 50.0 62.5 75.0 87.5 92.8 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 EBT Taxes (40% rate NOPAT 92.8 15.0% 45.0 Required Net Working Capital Req Cash+Receivables+Inventories Minus: Payables+Accruals Req Net Working Capital (RNWC) Increase in RNWC Fixed Assets Schedule: Net Fixed Assets (NFA Increase in NFA Plus: Depreciation 33.3% 50.0 66.7 83.3 100.0 116.7 123.7 16.7% -33.3 7 50.0 5.361.8 33.3% 50.0 66.6 83.3 100.0 116.7 123.7 10.0 125 15.0 17.5 18.6 26.729.2317 34.2 25.5 Free Cash Flows to Entity NOPAT Plus: Depreciation Minus: CAPEX Minus: Increase in NWC Operating Free Cash Flows 45.0 2 17.5 26.7 9.231.734.2 -25.5 8.3 -8.3 8.3 -8.3 3.5 5.0 12.420.027.545.2 Terminal Value CF (r.18,g.06) Total Free Cash Flows (TFCF PV of TFCF (18% Discount Rate) Less: LTD Value Equity Value Value Per Share (10,000 shares 5.012.420.0403.8 233.6 3 $20.36

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