SECTION II - VALUATION ANALYSIS (45 POINTS) NOTES Question 2 (30 points) Prepare a DCF Analysis given the following assumptions: Capital Rasing Money-Term Assumptions Debt Amount Bank Loan 360,000 Mezzanine Note 60,000 5.0% 51.0% 15.096 3.0% 22.0% Interest Rate LIBOR + 3.75% Fixed 8.00% Term (yrs) 5 7 Operating Assumptions (for years 1-5) Revenue Growth Cost of Revenue as % of Revenue Oper. Expense as % of Revenue Depreciation Expense as % of Revenue Tax Rate Working Capital Expense as % of Revenue Capex as % of Revenue Total Transaction Fees amortized over 5 years Schedules See below See below Expected Return Equity: Amount Amount 180,000 1.0% 1.00% 4.0% 2,500 Risk Free Historical Total Market Return Beta 12.00% 1.60x Interest and Principal Payments assumed that are paid at thet last day of the year WACC Sources: Amount % Capital Interest Exp Return Interest Exp Return After Tax Zero Year's year's EBITDA Multiple Bank Loan Mezzanine Note Equity Total Sources Use this for the Terminal Value 0 1 2 3 5 6 2.00% 2.5% 4.0% LIBOR LIBOR Increase Interest Rate (LIBOR + Spread) 3.0% % 0.50% 0.50% 1.00% + Bank Loan Information Amount Outstanding Schedule Payments Interest Payment Total Financing Payment 20,000 20,000 30,000 30,000 260,000 Corporate Bond Information Amount Outstanding Schedule Payments Interest Payment Total Financing Payment 60,000 Total Total Financing (P + 1) Total Debt Outstanding EXIT YEAR 2 3 5 Please enter cash inflows as positive and cash outflow as negative (000's) 0 Revenues 300,000 Cost of Revenues Operating Expenses | EBITDA 95,000 Less Depreciation Less Amortization of Fees EBIT Less Taxes Plus Depreciation & Amortization of Fees Less Working Capital Expense Less Capital Expenditures Free Cash Flow before financing Less Financing Expenses Net Cash Flow Terminal Value EXIT YEAR EBITDA Multiple Method using the intitial EBITDA multiple Perpetuity Method (using WACC) with no growth Average of two valuation methods Debt Outstanding Equity Value 1 2 3 Equity Cash Flows PV Values Total PV of Equity Values Less Initial Equity Inv. Equity NPV= Equity IRR = SECTION II - VALUATION ANALYSIS (45 POINTS) NOTES Question 2 (30 points) Prepare a DCF Analysis given the following assumptions: Capital Rasing Money-Term Assumptions Debt Amount Bank Loan 360,000 Mezzanine Note 60,000 5.0% 51.0% 15.096 3.0% 22.0% Interest Rate LIBOR + 3.75% Fixed 8.00% Term (yrs) 5 7 Operating Assumptions (for years 1-5) Revenue Growth Cost of Revenue as % of Revenue Oper. Expense as % of Revenue Depreciation Expense as % of Revenue Tax Rate Working Capital Expense as % of Revenue Capex as % of Revenue Total Transaction Fees amortized over 5 years Schedules See below See below Expected Return Equity: Amount Amount 180,000 1.0% 1.00% 4.0% 2,500 Risk Free Historical Total Market Return Beta 12.00% 1.60x Interest and Principal Payments assumed that are paid at thet last day of the year WACC Sources: Amount % Capital Interest Exp Return Interest Exp Return After Tax Zero Year's year's EBITDA Multiple Bank Loan Mezzanine Note Equity Total Sources Use this for the Terminal Value 0 1 2 3 5 6 2.00% 2.5% 4.0% LIBOR LIBOR Increase Interest Rate (LIBOR + Spread) 3.0% % 0.50% 0.50% 1.00% + Bank Loan Information Amount Outstanding Schedule Payments Interest Payment Total Financing Payment 20,000 20,000 30,000 30,000 260,000 Corporate Bond Information Amount Outstanding Schedule Payments Interest Payment Total Financing Payment 60,000 Total Total Financing (P + 1) Total Debt Outstanding EXIT YEAR 2 3 5 Please enter cash inflows as positive and cash outflow as negative (000's) 0 Revenues 300,000 Cost of Revenues Operating Expenses | EBITDA 95,000 Less Depreciation Less Amortization of Fees EBIT Less Taxes Plus Depreciation & Amortization of Fees Less Working Capital Expense Less Capital Expenditures Free Cash Flow before financing Less Financing Expenses Net Cash Flow Terminal Value EXIT YEAR EBITDA Multiple Method using the intitial EBITDA multiple Perpetuity Method (using WACC) with no growth Average of two valuation methods Debt Outstanding Equity Value 1 2 3 Equity Cash Flows PV Values Total PV of Equity Values Less Initial Equity Inv. Equity NPV= Equity IRR =