Hello, Thanks for doing this exercise. Although I accepted the answer, I received the following critiques. For 2010, the increase in NWC is compared with the end of 2009. You should calculate the NWC at the end of 2009, and deduct it from the NWC at the end of 2010. (3) As you are valuing this corporation as of the end of 2009, you should change the PV factors. For example, the PV factor for 2010 is equal to 1 divided by 1.15. Can you fix? Also, I have another exercise for you after. Thanks!

Assuming 360 days in a year Accounts Receivable = (DSO * Sales) / 360 Inventory = Cost of Sales / Inventory Turnover Ratio Accounts Payable = (Accounts Payable Days * Cost of Sales) / 360 Table 1 Accounts Receivable 2010 $7,460,492.93 2011 $8,191,550.44 2012 $8,995,632.60 2013 $9,879,189.63 2014 $10,453,221.00 2015 $11,060,049.64 2016 $11,700,044.89 2017 $12,618,311.92 2018 $13,361,101.05 2019 $14,422,209.96 Inventory $1,114,517.26 $1,204,458.81 $1,289,493.60 $1,367,507.96 $1,436,430.36 $1,494,318.51 $1,539,446.93 $1,601,486.64 $1,682,201.56 $1,783,974.76 Accounts Payable $1,114,517.26 $1,204,458.81 $1,289,493.60 $1,367,507.96 $1,436,430.36 $1,494,318.51 $1,539,446.93 $1,601,486.64 $1,682,201.56 $1,783,974.76 Net Working Capital $7,460,492.93 $8,191,550.44 $8,995,632.60 $9,879,189.63 $10,453,221.00 $11,060,049.64 $11,700,044.89 $12,618,311.92 $13,361,101.05 $14,422,209.96 Increase in Net Working Capital $7,460,492.93 $731,057.51 $804,082.16 $883,557.03 $574,031.37 $606,828.64 $639,995.25 $918,267.03 $742,789.13 $1,061,108.91 $15,693,440.26 $6,277,376.10 $9,416,064.15 $503,172.00 $7,460,492.93 $50,000.00 $10,000.00 $2,398,743.22 $17,931,110.36 $7,172,444.14 $10,758,666.22 $504,143.76 $731,057.51 $50,000.00 $10,000.00 $10,471,752.47 $20,515,173.18 $8,206,069.27 $12,309,103.91 $504,629.01 $804,082.16 $50,000.00 $10,000.00 $11,949,650.77 $23,494,914.35 $9,397,965.74 $14,096,948.61 $505,115.29 $883,557.03 $50,000.00 $10,000.00 $13,658,506.86 $25,019,137.18 $10,007,654.87 $15,011,482.31 $505,600.79 $574,031.37 $50,000.00 $10,000.00 $14,883,051.72 $26,742,712.81 $10,697,085.12 $16,045,627.68 $506,086.10 $606,828.64 $50,000.00 $10,000.00 $15,884,885.14 $28,673,223.39 $11,469,289.36 $17,203,934.03 $506,571.71 $639,995.25 $50,000.00 $10,000.00 $17,010,510.50 $31,611,013.21 $12,644,405.28 $18,966,607.93 $507,057.16 $918,267.03 $50,000.00 $10,000.00 $18,495,398.05 $33,332,792.26 $13,333,116.90 $19,999,675.36 $507,543.16 $742,789.13 $50,000.00 $10,000.00 $19,704,429.38 $36,864,656.23 $14,745,862.49 $22,118,793.74 $508,029.27 $1,061,108.91 $50,000.00 $10,000.00 $21,505,714.10 4 $2,398,743.22 0.572 $1,371,489.22 5 $10,471,752.47 0.497 $5,206,311.70 NPV 6 $11,949,650.77 0.432 $5,166,163.79 7 $13,658,506.86 0.376 $5,134,738.64 8 $14,883,051.72 0.327 $4,865,296.01 9 $15,884,885.14 0.284 $4,515,475.77 10 $17,010,510.50 0.247 $4,204,738.04 11 $18,495,398.05 0.215 $3,975,460.46 12 $19,704,429.38 0.187 $3,682,898.74 13 $21,505,714.10 0.163 $3,495,279.77 Table 2 EBIT Less: Income Tax Net Income after tax Add: Depreciation Less: Increase in Net working Capital Less: Capital expenditure Less: Leasehold Improvement Net Cash Flow Year Net Cash Flows PV Factor Present Value NPV 1 $0.870 $$41,617,852.14 2 $0.756 $- 3 $0.658 $- Week 1: Income Statement 10 year projection UNITS TOTAL 2007 500000 PER UNIT TOTAL 2008 540000 PER UNIT TOTAL 2009 577800 PER UNIT TOTAL 2010 624024 PER UNIT TOTAL 2011 667706 PER UNIT TOTAL 2012 707768 PER UNIT TOTAL 2013 743156 PER UNIT TOTAL 2014 772883 PER UNIT TOTAL 2015 796069 PER UNIT TOTAL 2016 811991 PER UNIT TOTAL 2017 836350 PER UNIT TOTAL 2018 869804 PER UNIT TOTAL 2019 913294 PER UNIT REVENUE PRODUCTS SERVICE $25,000,000.00 $1,500,000.00 $50.00 $3.00 $52.00 $30,946,968.00 $2.95 $1,675,620.00 $53.56 $34,091,179.95 $2.90 $1,719,186.12 $54.63 $37,571,889.42 $2.76 $1,747,552.69 $56.27 $41,419,250.90 $2.62 $1,759,785.56 $58.52 $45,664,724.12 $2.49 $1,755,386.10 $61.45 $48,441,139.34 $2.36 $1,734,321.46 $62.68 $51,391,204.73 $2.24 $1,697,033.55 $64.56 $54,515,789.97 $2.13 $1,644,425.51 $67.14 $2.03 $70.50 $62,543,523.53 $1.92 $1,589,761.52 $71.91 $67,640,820.70 $1.83 $1,585,787.11 TOTAL REVENUE $26,500,000.00 $53.00 $29,673,000.00 $54.95 $56.46 $35,810,366.07 $57.39 $39,319,442.11 $58.89 $43,179,036.46 $61.01 $47,420,110.21 $63.81 $64.92 $53,088,238.28 $66.69 $56,160,215.49 $69.16 $60,567,897.22 $72.42 $64,133,285.05 $73.73 $69,226,607.81 $75.80 EXPENSES COGS ADMINISTRATION UTILITIES RENT DEPRECIATION CONSULTANTS BAD DEBT (estimated at 3%) $10,000,000.00 $5,000,000.00 $200,000.00 $500,000.00 $500,000.00 $35,000.00 $15,000.00 $20.00 $11,124,000.00 $10.00 $5,151,600.00 $0.40 $205,200.00 $1.00 $513,000.00 $1.00 $502,200.00 $0.07 $43,200.00 $0.03 $10,800.00 $20.60 $12,260,916.00 $9.54 $5,304,204.00 $0.38 $213,786.00 $0.95 $531,576.00 $0.93 $502,686.00 $0.08 $40,446.00 $0.02 $17,334.00 $21.22 $13,374,207.17 $9.18 $5,410,288.08 $0.37 $220,199.58 $0.92 $547,523.28 $0.87 $503,172.00 $0.07 $43,681.68 $0.03 $17,854.02 $21.43 $14,453,505.69 $8.67 $5,572,596.72 $0.36 $229,007.56 $0.88 $563,948.98 $0.81 $504,143.76 $0.07 $46,739.40 $0.03 $18,389.64 $21.65 $15,473,923.19 $8.35 $5,795,500.59 $0.37 $240,457.94 $0.84 $580,867.45 $0.76 $504,629.01 $0.07 $49,543.76 $0.03 $18,941.33 $21.86 $16,410,095.55 $8.19 $6,085,275.62 $0.38 $254,885.42 $0.82 $598,293.47 $0.71 $505,115.29 $0.07 $52,020.95 $0.03 $19,509.57 $22.08 $17,237,164.36 $8.19 $6,450,392.16 $0.39 $272,727.40 $0.81 $616,242.28 $0.68 $505,600.79 $0.07 $54,101.79 $0.03 $20,094.86 $22.30 $17,931,822.09 $8.35 $6,901,919.61 $0.40 $294,545.59 $0.80 $634,729.54 $0.65 $506,086.10 $0.07 $55,724.84 $0.03 $20,697.70 $22.53 $18,473,363.11 $8.67 $7,454,073.18 $0.41 $321,054.69 $0.80 $653,771.43 $0.64 $506,571.71 $0.07 $56,839.34 $0.03 $21,318.63 $22.75 $19,217,839.65 $9.18 $8,124,939.76 $0.42 $353,160.16 $0.81 $673,384.57 $0.62 $507,057.16 $0.07 $58,544.52 $0.03 $21,958.19 $22.98 $20,186,418.76 $9.71 $8,937,433.74 $0.43 $392,007.78 $0.81 $693,586.11 $0.61 $507,543.16 $0.07 $60,886.30 $0.03 $22,616.94 $23.21 $21,407,697.10 $10.28 $9,205,556.75 $0.44 $439,048.71 $0.80 $714,393.69 $0.58 $508,029.27 $0.07 $63,930.61 $0.03 $23,295.45 $23.44 $10.08 $0.45 $0.78 $0.56 $0.07 $0.03 TOTAL EXPENSES $16,250,000.00 $32.50 $32.50 $18,870,948.00 $32.66 $20,116,925.81 $32.25 $21,388,331.75 $32.06 $22,663,863.28 $32.07 $23,925,195.86 $32.24 $25,156,323.63 $32.60 $26,345,525.47 $33.14 $27,486,992.10 $33.88 $28,956,884.01 $34.63 $30,800,492.79 $35.40 $32,361,951.59 $35.41 EBIT MARGIN $10,250,000.00 38.68% $20.50 $12,123,000.00 40.86% $22.45 $13,751,640.00 42.15% $23.80 $15,693,440.26 43.82% $25.14 $17,931,110.36 45.60% $26.83 $20,515,173.18 47.51% $28.94 $23,494,914.35 49.55% $31.56 $25,019,137.18 49.86% $32.32 $26,742,712.81 50.37% $33.55 $28,673,223.39 51.06% $35.28 $31,611,013.21 52.19% $37.78 $33,332,792.26 51.97% $38.33 $36,864,656.23 53.25% $40.39 EBITDA MARGIN $10,750,000.00 40.57% $21.50 $12,625,200.00 42.55% $23.38 $14,254,326.00 43.69% $24.67 $16,196,612.26 45.23% $25.95 $18,435,254.12 46.89% $27.58 $21,019,802.19 48.68% $29.66 $24,000,029.64 50.61% $32.24 $25,524,737.97 50.87% $32.97 $27,248,798.91 51.33% $34.19 $29,179,795.10 51.96% $35.91 $38.39 $38.91 $40.95 $28,080,000.00 $1,593,000.00 $17,550,000.00 $32,622,588.00 $50,175,460.80 $58,958,826.86 $1,609,070.36 $32,118,070.37 53.03% $33,840,335.42 52.77% $37,372,685.50 53.99% $74.06 $1.74