Using the spreadsheet template provided, calculate the value of Generic Research under the growth strategy.

• In addition to the growth rate, they will spend an extra $5M on advertising in 2013, 2014 and 2015.
• The planning period growth rate is 8%, the terminal growth rate is 3%, and WACC is 8.8%.
• The interest rate on new debt is 6.5%.
• Revenues and expenses grow at the same rate.

Use the following template. This contains the pro forma balance sheet, which has already been completed for you, and the post-acquisition 2009 numbers for the income statement. The groundwork has been laid, and you can start putting in your growth rates, calculating the pro forma income statement and the free cash flows. You can use a planning period of five years and use the sixth year for the terminal value calculation. Calculate terminal value using the growing perpetuity method.

Post-Acquisition 2009 2015 2012 52,738,935 2013 56,958,050 Balance Sheet Current assets Gross property, plant & equipment Less: accumulated depreciation Net Property Plant&Equipment Goodwil 2014 45,215,136 48,832,347 61,514,69466,435,869 (41,024,785)(48,044,785) (55,626,385) (63,814,513) (72,657,691 (82,208,324) (92,523,007 47,209,126 47,247,839 47,289,649 47,334,804 47,383,571 20,819,868 109,825,826 113,208,285116,861,342 120,806,642 125,067,567 129,669,366 134,639,308 47,140,091 20,819,868 47,173,281 20,819,868 20,819,868 20,819,868 20,819,868 20,819,868 al Assets 11,460,84312,377,711 40,000,000 52,377,711 400,000 59,600,000 8,428,931 68,428,931 Current Liabilities Total Liabilities Common stock (par) Paid-in capital Retained earnings Common equity 15,592,351 40,000,000 55,592,351 400,000 59,600,000 19,046,957 79,046,957 109,825,826 113,208,285 116,861,342 120,806,642 125,067,567 129,669,366 134,639,308 9,825,826 40,000,000 49,825,826 400,000 59,600,000 10,611,892 40,000,000 50,611,892 400,000 59,600,000 2,596,393 62,596,393 40,000,000 51,460,843 400,000 59,600,000 5,400,498 65,400,498 13,367,928 40,000,000 53,367,928 400,000 59,600,000 11,699,639 71,699,639 14,437,362 40,000,000 54,437,362 400,000 59,600,000 15,232,004 75,232,004 60,000,000 Total Liabilities & Equity Post-Acquisition 2009 80,000,000 45,733,270 34,266,730 17,600,000) (6,500,000 10,166,730 (2,523,020) 2011 2012 Income Statement Revenues Cost of Goods Sold Gross Profit SG&A Expenses Depreciation Expense Net Operating income Interest Expense Earnings before Taxes Taxes Net Income 2010 2013 201s 1,910,928 5,732,783 Post-Acquisition 2009 2015 2012 52,738,935 2013 56,958,050 Balance Sheet Current assets Gross property, plant & equipment Less: accumulated depreciation Net Property Plant&Equipment Goodwil 2014 45,215,136 48,832,347 61,514,69466,435,869 (41,024,785)(48,044,785) (55,626,385) (63,814,513) (72,657,691 (82,208,324) (92,523,007 47,209,126 47,247,839 47,289,649 47,334,804 47,383,571 20,819,868 109,825,826 113,208,285116,861,342 120,806,642 125,067,567 129,669,366 134,639,308 47,140,091 20,819,868 47,173,281 20,819,868 20,819,868 20,819,868 20,819,868 20,819,868 al Assets 11,460,84312,377,711 40,000,000 52,377,711 400,000 59,600,000 8,428,931 68,428,931 Current Liabilities Total Liabilities Common stock (par) Paid-in capital Retained earnings Common equity 15,592,351 40,000,000 55,592,351 400,000 59,600,000 19,046,957 79,046,957 109,825,826 113,208,285 116,861,342 120,806,642 125,067,567 129,669,366 134,639,308 9,825,826 40,000,000 49,825,826 400,000 59,600,000 10,611,892 40,000,000 50,611,892 400,000 59,600,000 2,596,393 62,596,393 40,000,000 51,460,843 400,000 59,600,000 5,400,498 65,400,498 13,367,928 40,000,000 53,367,928 400,000 59,600,000 11,699,639 71,699,639 14,437,362 40,000,000 54,437,362 400,000 59,600,000 15,232,004 75,232,004 60,000,000 Total Liabilities & Equity Post-Acquisition 2009 80,000,000 45,733,270 34,266,730 17,600,000) (6,500,000 10,166,730 (2,523,020) 2011 2012 Income Statement Revenues Cost of Goods Sold Gross Profit SG&A Expenses Depreciation Expense Net Operating income Interest Expense Earnings before Taxes Taxes Net Income 2010 2013 201s 1,910,928 5,732,783