Analytical Tools - Final Project With Executive Summary

8/2/2019 Analytical Tools - Final Project With Executive Summary

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Executive Summary

Richmond Disposal Equities is a leader in the garbage disposal business. We provide

garbage pickup and disposal services to municipalities across the state of Oz. Our clients

consist, mostly of residential dwellings in affluent neighborhoods. We provide an essential

services and our business has seen an explosion in growth as the population of the state and itsmunicipalities continues to increase. Our landfill life expectancy and long term contracts with

growing municipalities places us above the competition as we continue to rapidly grow and

expand our operations.

Business

Richmond Disposal collects and disposes garbage. Richmonds collection of garbage is

segmented into three categories (i) hauling, (ii) intermediate disposal (iii) final disposal.

Presently we are engaged in the collection and disposal of garbage from over 116,000

residents. Our competitive advantage is the size and life expectancy of our landfills, along with

our long term contracts with municipalities.

Competition

Our competitors are rapidly depleting the useful lives of their landfills. Once our

competitors have run out of landfill space they will have no other option but to utilize our

landfills. The central location of our Davies landfill will force our competitors to deal exclusively

with us or risk going out of business. We have a competitive advantage because our landfills

have a current life expectancy of 55 years. Most importantly we do not anticipate any new

companies to enter the market.

Risk

The greatest risks associated with our business today are governmental regulations

and the acquisition of long term municipal contracts. We have overcome these risks by working

closely with governmental regulators and our records indicate that currently we are operating

at or above government regulations. Secondly we have acquired long term contracts form local

municipalities with options to further renew the contract. Historically 95% of our customers

have renewed their contracts.

Sale of Richmond Disposal Equities

Richmond has been negotiating with various parties for the sale of the company. The

owners have worked extremely hard for the past twenty years in order to give Richmond an

exceptional reputation in the industry. However, the owners desire to sell the company and

retire. Richmond has negotiated a sale of the company and is currently in the process of

transferring ownership to the new management. The details of this transaction are provided in

this report.


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Richmond Disposal Equities

Sellers Perspective

The first and foremost question to be addressed must be whether John wants to sell

Richmond Disposal Equities to prospective buyers or transfer the company to his heirs.

Alternatively, he may also want to sell the company but retain a certain amount of interest.

Here are some of the initial factors to be taken into consideration when making this decision:

John should sell and diversify earnings in stable investments

Given the fact that Elaina needs money for her day-to-day living, her old age and illness,

and the fact that her children show no interest in the company, Johns best option is to sell

Richmond before Elainas interests are passed on to her children. Once the interests are passed,

they will gain significant control of the company and given their inexperience, may want to

make a quick cash deal to sell the company.

In Johns old age and his desire to retire from the grind, he needs a stable portfolio of

investments to generate cash. Currently, all of his wealth is tied in this business which presents

a concentration risk. In order to avoid this risk, he should diversify his wealth by investing the

cash from sales into mature, income generating stocks such as (insert examples). These

businesses typically pay out quarterly dividends, which would allow John to live comfortably in

his retirement.


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a financial buyer can be private equity funds, or investment banks. The financial buyer would

likely milk the business until Richmonds contracts are up for renewal, put a lot of debt on the

company, and look to sell.

John should sell to a strategic buyer because this type of buyer would generate more

synergy from the business by getting rid of redundant functional areas and jobs. This potential

for generating synergy will influence the buyer into paying more for the company as opposed to

financial buyers that are strictly concerned with capital.

The Buyers Perspective

Exclusivity

The buyer in this transaction wants exclusivity. The buyers position is that it will pay a

good amount of money for the business but John cant run an auction and has to deal strictly

with the buyer. The main reason that the buyer is looking for exclusivity is to avoid competing

with other potential buyers. The buyer should propose that John cannot reach out to other

companies for the 60 days and must deal with the buyer alone.

If john is unwilling to deal exclusively with the buyer, the buyer may offer a go-shop in

order to reach a middle ground. This way the buyer will make the offer and then allow John to

solicit bids for 2 weeks to see if he can get a better offer. Offering this provision in the contract

will of give John some comfort when making a semi-exclusive transaction.


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Due Diligence

The most imperative concern for the buyer is due diligence. The buyer has to confirm all

the aspects of the business including the financials and Richmonds contracts. Any change of

control provisions within the contracts between Richmond and its customers would seriously

affect the position of the buyer. This type of provision gets triggered when a business decides

to sell to a buyer and lead to nullifying to existing contracts. Richmonds fundamental activity is

the contracts which generate income. Therefore, the buyer needs to perform due diligence and

visit Richmonds existing clients to be assured that the client is ok with the change of

management.

Evaluation

Liquidity

Appendix G shows that Richmonds current ratio of asset to debt (0.40) is below the

bench mark of 1.5 -2.0, which shows a negative aspect towards short term financial

responsibilities. This is a red flag for the buyer because it is a sign that Richmond will not be

able to pay off its short term debt obligations and still fund its ongoing operations. Currently,

Richmond will only be able to pay off 40% of its debt obligations when considering the amount

of capital available to pay these debts.

Solvency

Richmonds debt-to-equity ratio is 0.40. In another words, its total liabilities are roughly

equal to less than half of its owners equity. This ratio indicates that Richmond has not been


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financing its growth with debt accumulated from outside financing. The buyer can look at this

number as a good sign because companies that are too highly leveraged, even a slight

downturn in profitability could leave the company incapable of repaying its creditors.

Richmond on the other hand, for every dollar of assets, financed only about 30 cents

with debt and the other 70 cents with owners equity, this generally indicates that Richmond is

using less leverage and has a strong equity position.

Managerial Efficiency

Richmonds ratio of accounts receivable to sales revenue is roughly 11%, this means

Richmonds accounts receivables are 11% of its annual revenues. If we assume that revenue

had been generated evenly throughout the year, we can see that it takes customers about 41

days to pay off their accounts. This is a very reasonable period because we can see that

Richmond can take, on average 68 days to pay off its accounts payable. Therefore, between the

number of days it takes for customers to pay their accounts and the number of days Richmond

has to pay off its debts, there is a 27 day cushion.

Profitability

The margin ratio reflects the percentage of sales that remain after direct cost (cost of

goods sold) and indirect costs (operating expenses) were reduced. Richmonds margin shows

that every dollar of sales generates 14 cents of operating income. The return on asset (ROA)

shows the amount of income that each dollar of assets generate. Richmonds ROA is around


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53%. The return on equity (ROE) measures the return on owners investment in a firm.

Richmonds ROE is 75% leverage towards debt.

Determining the Purchase Price

In order to figure out how much Richmond is worth when purchasing the business, it

should be assumed, for the purpose of the evaluation that Richmond will be around forever.

Discounted Cash Flow Analysis

There is an assumption to be made here, based on the figures in table 1 relating to

present value of free cash flow, we can forecast what the company is worth from 2016 to

eternity. In order to utilize a practical way of evaluating how much capital Richmond will

generate from 2016 forward, we will take the EBIDTA value and apply a multiple to it. The

multiple used is 7 times. We got this multiple by looking at other businesses that were very

similar, and what an investor is will to pay today for the businesses. (Reference to table)

For example, in 2012, we took the total revenue of the company and subtracted the

total operating expenses and then added other income to get the EBITDA value of $5540. This

figure reflects how much Richmond will make in 2012 before income tax, interest for

borrowing, depreciation and amortization. However, in order to evaluate how much cash will

be generated, we subtracted depreciation and amortization which left us with the EBIT value.

The main purpose for these calculations is to see how much cash is generated, we are

not concerned with accounting profits here because they take into account non-cash items

such as depreciation. We also deducted corporate tax at 39% and capital expenditures


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(equipment purchases and other expenditures for the year). Finally, we deducted the change in

working capital which was basically the difference between what Richmond owed to creditors

and what Richmond was owed. These calculations reflect the amount of free cash flow

Richmond possesses.

In a world where there is no concept of present value, Richmond would generate the

sum of the free cash flow figures from 2012 to 2016 plus the $84,000 figure (2016 EBITDA

figure multiplied by exit multiple of 7). In order to figure out the present value of the cash that

Richmond would generate, we took into consideration a present value factor. For example, in

2012, Richmond will generate 2280, however the buyer is not going to pay this amount for it

today because cash is worth more today than it is worth in the future. Taking this figure of 2280

and multiplying it by the present value factor shows a present value of cash flow to be $2127.

We similarly did this evaluation for all the years and reached a number of $11,532. We did the

same present value calculation of the terminal year and got a figure of $41, 923. Adding these

figures together and subtracting the negative cash flow ($70,000), we reached a total equity

value $53,384.

Trading Comparable Analysis

One of the reasons why we decided to do this analysis is because we are making the

assumption that similar companies in the industry should have the same evaluation, such as

multiples. The market price of a company is derived from multiplying the stock price by the

number of shares; however enterprise value also takes into consideration the debt value and

adds that value to this figure. Table to shows the price to earnings multiple for 5 companies,


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this multiple is important because it shows the figure that the company trades at. For example,

if a companys earnings per share is $1 and their stock price is $10, the pe multiple would be 10,

therefore it would be trading at 10 times its earnings. Waste Connection for example has a pe

multiple of 9.2, meaning that its enterprise value is 9.2 times its EBITDA.

These figures are important in our analysis because in calculating Richmonds enterprise

value, we are using the multiples from these 5 companies. Therefore, based on the multiples of

competitors, the value of Richmond could be between 32.6 million dollars and about 51 million

dollars.

The seller will likely try to add a premium to the value of the company because the seller

wants some return; usually companies add a 30% premium to the enterprise value in order to

earn profits. In the overall picture, Table shows that Richmond should be valued somewhere

between 33 and 51 million with an average of 40 million. Adding a 30% premium leaves the

value of Richmond somewhere between 42 and 60 million. This range reflects an acceptable

range of values.

Precedent Transactions Analysis

This analysis reflects the multiples similar transactions that have taken place. In order to get an

idea of the enterprise of value of Richmond, we can use these multiples. The EBITDA value we

are using is for the last twelve months (LTM), $4,579. By multiplying this figure with the

multiples of similar transactions, we are trying to figure out, how much Richmond may be

worth when comparing other buy-outs. This analysis shows that Richmond is roughly worth

$39, 244.


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The Football Field Analysis

In order to ascertain an acceptable value as to Richmonds worth, we used this analysis to take

an average of the DCF analysis, the precedent transactions, and trading comparable. The result

of this analysis reflects that Richmond is roughly worth $48, 156,000.

The Negotiation Process

First Meeting

Seller valued company at $84,322,000 based on a discounted cash flow analysis.

However the buyer had an issue with this figure because first and first most, it never took into

account the present value factor. Money is worth more today than it is in the future, so buyer

wanted to get a more accurate idea of how much the income generated in the future would be

worth today.

Adding the present value factor, the companys equity value was shown as $53,000,000.

The buyer proposed that this is how much the company is worth TODAY.

Even with this figure the buyer had a problem because it may not be an accurate

statement of worth for Richmond. The seller is relying too heavily on the projected numbers

and is not taking into account other factors that may significantly affect the value of the

company:

Buyers concerns: (1) the condition of the vehicle fleet and its current value (2) details of

Richmonds contracts (3) Ensure that existing contracts will not be affected by new

management (4) verify all financial statements with personal accountant (5) True capacity of


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Richmond Landfills (6) IP rights to Richmond (7) No revenue in 2001? (8) Why does the

regulatory agency report a only a 7 year useful life for this landfill (9) How long it will take for

surrounding landfills to reach full capacity same with Canton life expectancy reported at 6

years by agency (10) If current amendment to city of Willard exporting rate is upheld, how

much more volume will the Davies Landfill Receive (11) Why the lack of space in the Davies

landfill during the last quarter of 2011 (12) $7 million of standby letters in off balance sheet

liabilities (13) How far are the discussions regarding the acceptance of the 200 tpd of biosolid

waste (14) Why isnt Davies landfill accepting more out of state waste stream even though it is

more convenient and cheaper than both the Charle and Brendan landfills (15) Even if Richmond

can secure the anticipated contracts it will bid for in 2012 and 2013, will it be able to handle the

increased amount of waste? What impact would this have on the capacity of the current

landfills owned by Richmond?

Second Meeting

For the assumptions in the Discounted Cash Flow Analysis the seller initially used a

WACC or discount rate of 7%. This was based on the rate that other like companies were

using. The buyer cant help but notice that these other companies are multi-billion dollar

players, the seller should not be using the same discount rate as them because these

companies are secure. Instead, the buyer proposed a discount rate of 15% in order to evaluate

the company accurately because it factors in the increased risk with Richmond due to the fact

that its a privately held company, the potential for union strikes, and significant reduction of

income compared to the other companies.


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The seller also valued Richmond based on trading comparables. The result of the

analysis showed that Richmond was worth $53,000,000. This was based on EBITDA rate of

Richmond multiplied by the exit multiples (what investors were willing to pay for these

companies) that these companies used and averaged these figures. However, the seller also

added a 30% premium to these figures because the seller stated that he wants some take out

value from the company. Companies never sell for exactly how much they are worth; they

always put a premium on the figure.

Third Meeting

The buyer evaluated Richmond in another way using precedent transactions Analysis.

Buyer looked at similar transactions in the past and used Richmonds 2010 EBITDA rate and

multiplied it by the multiple that these companies were using. The average of these

transactions reflected that on average, Richmond would be worth $39,244,000. The seller

proposed that instead of using a single method to evaluate the company, a more accurate

method of looking at the total value would be to take an average of the results of these

different analyses. Therefore, the partys agreed on a football field analysis which averaged out

the DCF, trading comparable, and precedent transactions to give us a figure of $48,156,000.

Based on the condition of Richmonds vehicle fleet and other concerns mentioned earlier, the

buyer offered a price of $45,000,000. The seller did not accept this term for many reasons:

(1)Future growth strategy promises significant income generation by Richmond (2)

surrounding landfills reaching capacity meaning more business for Richmond (3) Good


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Faith value of the company with Richmonds contacts, long-term contracts and promise

of stability

After this, buyers discounted this price by 15% to allow a possible return of on investments..

1. Buyer: Discounted by buyer at 15% this leaves the price at $41 million.

2. Seller: Discounted price $2 million for vehicle upgrades ($46 million)

3. Buyer: Also added $2 million for accounts payable ($43 million)

4. Seller Argues these points in the negotiations: good faith value of company is not

reflected in the numbers (20 years of good service + pending bio solid contract +

growth strategy + other landfills filling up (competitors) + 95% chance of contract

renewals

5. Buyer Argues: ($3 million in assumed contracts is speculation + cost of finishing

single stream recycling project + union might strike + continuing payment on canton

perpetual land fill (half million))

6. After these negotiations the buyer was still left with a figure of $43 million and seller

with $46 million.

We decided that the final price of the company would be based on the payment structure of

the deal. If seller is willing to take $43 million, buyer is willing to give cash. If Seller takes $46

million, buyers are willing to pay half in cash, and half in stock options.

Type of Transaction

Seller wants a cash deal, even though he would have to pay taxes for this transaction, he

recognizes that by investing his cash in mature stocks, and he can make the money he paid in

taxes back rather quickly. He does not want to own stock options because he wants to diversify

his wealth and avoid concentration risk of investing all his wealth in one company.

Buyer does not want to pay cash for the transaction because (1) by investing available

cash buyer can generate income over time instead of paying the cash out to the seller (2) avoid


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paying the cost of borrowing capital (3) spreads out risk to the seller by spreading out stock

options

Detailed Purchase and Contract Terms

The parties came to an agreement on a total cash deal for $43,000,000. Elaina is entitled to half

of this amount after taxes. The money will be paid out in the following manner:

1. $20 million in a cash lump sum payment which will be divided equally between John and

Elaina

2. Of the remaining $23 million, the buyers will make annuity payments of $1 million per

month for 23 months, which will also be divided equally between the two sellers

Elaina will likely put her money in a trust for her children. This money will be transferred to

her children at the time of her death. John will be taking the same measures in order to secure

his retirement for as long as he is alive, and then transferring the money to his children.

Impact of transaction on Spencer Family

John: (1) He will be able to retire peacefully and will have financial security from transaction. He

can spread out his investments into mature stocks

Kory: (1) not very interested in the operations of the company but will benefit from the

transaction because he will gain financial security for his future when trust is transferred to his

name. This will give some financial security to his wife and children


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Brendan: (1) Negotiated a three year contract between Brendan and buyer in order to keep

Brendan employed after the transaction if he wants (Bidding and client relations). It would be

good for the buyer because Brendan has 3 years experiences and a familiar face is always good

when management changes. (2) Brendan will also gain financial security as half of Johns money

will be transferred to Brendan at the time of Johns death

Elaina: (1) She will receive a large cash payment in order to help with her living expenses in her

old age (2) She can transfer money to her 2 children at the time of her death (3) she will not be

concerned about the day to day operations of Richmond and will have financial security and

funds for health expenses

George: (1) can negotiate to keep George employed at the landfill (2) He will gain half of

Elainas money at the time of her death

Bob: (1) will receive future interests in a trust that will be transferred to him at the time of

Elainas death. He can use this money to operate/expand his own business (2) doesnt seem like

he cares about Richmond and it should not have much of an impact on him


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Discounted Cash-Flow Analysis

2012E 2013E 2014E 2015E 2016E

Revenue

Landfill $6,501 $10,020 $12,381 $13,896 $14,582

Transfer Station (3rd Party) 1,016 1,036 1,057 1,078 1,100

Permanent Roll Off 2,948 3,007 3,067 3,129 3,191

Commercial (Front Load) 2,132 2,175 2,218 2,263 2,308

Residential-Municipal Contracts 14,554 17,179 20,179 23,179 26,179

Residential 3,994 3,994 3,994 3,994 3,994

Other 452 461 470 480 489

Less: I/C landfill Revenue (4,345) (4,924) (5,576) (6,229) (6,884)

$27,252 $32,948 $37,790 $41,790 $44,959

Operating Expenses

Payroll Expense $11,290 $12,872 $14,479 $15,946 $17,318

DisposaI Costs 1,929 2,248 2,512 2,698 2,835

Maintenance Expense 1,768 2,131 2,485 2,794 3,074

Fuel Expense 3,564 4,175 4,752 5,238 5,666

Equipment Leases and Rental 222 238 252 263 272

Licenses and Permits 197 206 216 226 237

Supplies 80 88 98 107 117

Insurance 597 656 706 748 782

Advertising 59 72 87 103 118

ProfeSSional Fees 695 700 704 708 713

Bad Debt Expense 57 61 64 65 65

Bank Charges and Bonding 415 443 476 509 541

Building Rent 32 32 32 33 33

Property Taxes 141 141 142 143 144

Telephone and Utilities 414 455 496 532 564

Other Expenses 302 361 412 453 486

Total Operating Expenses $21,762 $24,879 $27,913 $30,566 $32,965

Other Income 50 51 51 51 52

EBITDA $5,540 $8,120 $9,928 $11,275 $12,046

Less: Depreciation and Amortization (3,801) (4,587) (5,072) (5,589) (6,026)EBIT $1,739 $3,533 $4,856 $5,686 $6,020

Less: Taxes 39.0% (678) (1,378) (1,894) (2,218) (2,348)

Plus:Depreciation and Amortization 3,801 4,587 5,072 5,589 6,026

Less: Changes in Working Capital $1,583 $797 $677 $559 $443

Less: Capital Expenditures (4,164) (6,579) (6,364) (2,914) (4,774)

Free Cash Flow $2,280 $960 $2,347 $6,703 $5,367

Present Value of Free Cash FlowPeriod 1.0 1.5 2.5 3.5 4.5Free Cash Flow $2,280 959.8 2,347.4 6,702.9 5,367.4PV Factor 0.9325 0.8109 0.7051 0.6131 0.5332PV Cash Flows $2,127 $778 $1,655 $4,110 $2,862

Terminal Year Cash FlowPeriod 5.0EBITDA $12,046

Exit Multiple7.0x

Terminal Year Value $84,322PV Factor 0.4972PV Cash Flow $41,923

Enterprise Value $53,454Less Debt 0Plus Cash ($70)Equity Value $53,384

Appendix A


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Appendix B

Working Capital Schedule

2012E 2013E 2014E 2015E 2016E

2011 Revenue $26,021 $27,252 $32,948 $37,790 $41,790 $44,959

AccountsRecievables

$2,945 $3,084 $3,729 $4,277 $4,730 $5,088

Days 41 41 41 41 41 41

Prepaid Expenses $382 $400 $484 $555 $613 $660

Percent ofRevenue

1.5% 1.5% 1.5% 1.5% 1.5% 1.5%

Other current

Assets$220 $230 $279 $320 $353 $380

Percent ofRevenue

0.8% 0.8% 0.8% 0.8% 0.8% 0.8%

Accounts Payable $3,438 $5,078 $6,139 $7,041 $7,787 $8,377

Days 68 68 68 68 68 68

Accrued Expenses $2,338 $2,449 $2,960 $3,395 $3,755 $4,040

Percent ofRevenue

9.0%9.0% 9.0% 9.0% 9.0% 9.0%

Working Capital ($2,229) ($3,812) ($4,608) ($5,286) ($5,845) ($6,288)


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Appendix C

Assumptions

WACC 15.0%

Exit Multiple 7.0x

Sensitivity Analysis

##### 12% 13% 14% 15% 16% 17% 18%

6.0x 53,406 51,299 49,298 47,395 45,586 43,865 42,227

6.5x 56,823 54,568 52,426 50,390 48,454 46,612 44,859

7.0x 60,241 57,837 55,554 53,384 51,322 49,359 47,492

7.5x 63,658 61,106 58,682 56,379 54,189 52,107 50,125

8.0x 67,076 64,375 61,810 59,373 57,057 54,854 52,758

8.5x 70,494 67,644 64,939 62,368 59,924 57,601 55,390

9.0x 73,911 70,913 68,067 65,362 62,792 60,348 58,023

Sensitivity Analysis

WACC 12% 13% 14% 15% 16% 17% 18%

ExitMultip

le

6.0x 53,406 51,299 49,298 47,395 45,586 43,865 42,227

6.5x 56,823 54,568 52,426 50,390 48,454 46,612 44,859

7.0x 60,241 57,837 55,554 53,384 51,322 49,359 47,4927.5x 63,658 61,106 58,682 56,379 54,189 52,107 50,125

8.0x 67,076 64,375 61,810 59,373 57,057 54,854 52,758

8.5x 70,494 67,644 64,939 62,368 59,924 57,601 55,390

9.0x 73,911 70,913 68,067 65,362 62,792 60,348 58,023


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Appendix D

Trading Comparables

Waste

Connections

Waste

Management

Republic

Services

Progressive

Waste

Solutions

Casella Waste

ManagementAverage

2012E

EBITDA: 5540

Market Cap. (US$MM) $3,582 $16,737 $11,869 $2,566 $1722013E

EBITDA: 8120

Enterprise Value (US$MM) $4,755 $25,449 $18,353 $3,862 $625

2012E-2013E EBITDA Growth 7.6% 6.4% 5.0% 4.9% 11.2%

2012E EBITDA Margin 32.0% 25.0% 30.4% 28.9% 21.5%

P / CY 2012E EPS 21.0x 15.8x 15.4x 18.5x nmf

EV / CY 2012E EBITDA 9.2x 7.4x 7.3x 7.0x 5.9x

EV / CY 2013E EBITDA 8.5x 7.0x 6.9x 6.7x 5.4x

LTM ROCE 8.1% 8.1% 7.2% 6.7% 3.1%

Debt / CY 2012E EBITDA 2.3x 2.8x 2.7x 2.4x 4.5x

EV based on 2012E EBITDA 50,968 40,996 40,442 38,780 32,686 40,774

Take out value (+30% premium) 66,258 53,295 52,575 50,414 42,492 53,007

EV based on 2013E EBITDA 69,165 56,514 56,104 54,531 43,854 56,034

Take out value (+30% premium) 89,914 73,469 72,936 70,890 57,010 72,844

Trading Comp Trading Comp + 30%

Min 32,686 Min 42,492

Max 50,968 Max 66,258

Average 40,774 Average 53,007


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Appendix E

Precedent Transactions

Transaction EV/LTM EBITDA Est. Take-out value ** Net Debt ~$0

Florida Recycling / Waste Services (2003) 11.8x $53,857

Biffa / Montagu & Consortium (2008) 10.0x 45,579

IESI / BFI Canada (2004) 9.5x 43,501

WCA Waste / Macquarie Capital (2011) 9.2x 42,346

Waste Industries / WWIN Consortium (2007) 8.6x 39,419

WSII Jacksonville / Advanced Disposal (2008) 8.2x 37,613

Hydrochem Industrial / Aquilex (2007) 7.9x 36,060

Allied / Republic (2008) 7.6x 34,938

Waste Services / IESI-BFC (2009) 7.6x 34,800

Oakleaf Global Holdings / Waste Management (2011) 5.3x 24,326

Average 8.6x 39,244

2010 EBITDA per Exhibit F $4,579.00

Min 24,326

Max 53,857

Average 39,244


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Appendix F

Actual Selected

Multiple

LowMutiple High Min Max Min Diff. Max

DCF $51,322 $61,810 $51,000 $10,800 $61,800 $56,400 $48,156

Precedents7.5x 9.5x $41,550 $52,630 $41,550 $11,050 $52,600 $47,075 $48,156

Trading

Comps

6.0x 8.0x $33,240 $44,320 $33,200 $11,100 $44,300 $38,750 $48,156

Trading Comps + 30%

Premium

6.0x 8.0x $43,212 $57,616 $43,200 $14,400 $57,600 $50,400 $48,156

2012E EBITDA $5,540

$51,000

$41,550

$33,200

$43,200

$61,800

$52,600

$44,300

$57,600

DCF Precedents Trading Comps Trading Comps + 30% Premium

Average $48,156


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Appendix G

Liquidity Asset to Debt $3,477 /

$8,651

.40 Negative aspect towards short term financial

responsibility

Solvency Debt to Equity $11,112 /

$26,121

.425 Negative aspect towards long term

obligations

Debt to Total

Asset

$11,112 /

$37,233

.2984 30 cents of every dollar for debt. 70 cents

owners equity

Managerial Acct. Rec to

Revenue

$2,945 /

$26,021

.1132 It takes on an average of 5.9 weeks for

customers to pay their bill

Profitability Margin $3,641 /

$26,021

.1399 Every dollar of sales generates 14 cents of

operating income

ROA $19,717 /

$37,233

.5296 Income that each dollar of assets generates

ROE $19,717 /

$26,121

.7548 Leverage against debt

Documents

Analytical Tools - Final Project With Executive Summary