Case 2 : Teuer Furniture (A)Discounted Cash Flow Valuation

Section - AGroup 4

PGP/19/016 Deepika DudheyPGP/19/102 Shilpi JainPGP/19/148 Manan AgrawalPGP/19/176 Thilak Kumar K

Case 2 : Teuer Furniture (A)Discounted Cash Flow Valuation

These spreadsheet exhibits relate to the case Teuer Furniture (A): Discounted Cash Flow Valuation, Case #KEL778.

©2015 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Mitchell A. Petersen. Teuer Furniture is a fictional company whose profile was created based on data from real industry leaders. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) or e-mail custserv@hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Kellogg Case Publishing.

These spreadsheet exhibits relate to the case Teuer Furniture (A): Discounted Cash Flow Valuation, Case #KEL778.

©2015 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Mitchell A. Petersen. Teuer Furniture is a fictional company whose profile was created based on data from real industry leaders. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) or e-mail custserv@hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Kellogg Case Publishing.

Exhibit 1: Teuer Furnitures Showrooms and Square Footage

Stores Total SQ FT TotalOpened Stores Opened SQ FT

2003 1 1 17,200 17,2002004 3 4 17,600 70,0002005 4 8 18,500 144,0002006 5 13 21,100 249,5002007 6 19 22,100 382,1002008 2 21 15,500 413,1002009 1 22 14,500 427,6002010 2 24 14,700 457,0002011 2 26 15,400 487,8002012 3 29 16,300 536,7002013 2 31 16,000 568,7002014 2 33 16,000 600,7002015 2 35 15,000 630,700

763655764480 1290960

48900

2003 2005 2007 2009 2011 2013 20150

5

10

15

20

25

30

35

40

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Number of Showrooms Total Square Feet

2003 2005 2007 2009 2011 2013 20150

5

10

15

20

25

30

35

40

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Number of Showrooms Total Square Feet

Exhibit 2: Economic Indicators: GDP and Furniture Sales Growth2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

CPI index 180.9 184.3 190.3 196.8 201.8 210.0 210.2 215.9 219.2 225.7 229.6 233.5 237.7 242.3 247.4 252.1 256.6 261.3 Inflation (CPI) 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.7% 1.8% 1.9% 2.1% 1.9% 1.8% 1.8%GDP (T$) 10,642 11,142 11,853 12,623 13,377 14,029 14,292 13,974 14,499 15,076 15,685 16,238 17,049 18,012 19,021 20,078 21,101 GDP growth 4.7% 6.4% 6.5% 6.0% 4.9% 1.9% -2.2% 3.8% 4.0% 4.0% 3.5% 5.0% 5.6% 5.6% 5.6% 5.1%Furniture sales ($B) 94.44 96.7 103.8 109.1 112.8 111.1 99.6 86.3 87.3 90.1 93.1 95.9 98.6 101.2 103.6 105.9 108.0 110.2 Furniture sales growth 2.4% 7.3% 5.2% 3.4% -1.5% -10.4% -13.4% 1.2% 3.2% 3.4% 3.0% 2.8% 2.6% 2.4% 2.2% 2.0% 2.0%

2003 2005 2007 2009 2011 2013 2015 2017

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

GDP Growth Furniture Sales Growth Inflation (CPI)

Exhibit 3: Teuer Furniture Income Statement2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Sales 2,057 10,415 26,701 51,540 79,191 90,680 111,451 134,093 148,218Cost of goods sold -1,463 -7,057 -17,424 -30,730 -43,834 -47,290 -49,068 -55,487 -61,955Selling, general and admin -410 -1,812 -4,958 -9,230 -13,576 -14,679 -16,471 -18,698 -21,253 Advertising -203 -1,019 -2,411 -4,588 -6,585 -7,532 -8,367 -9,545 -10,744 Depreciation -72 -307 -669 -1,264 -2,075 -2,188 -2,032 -1,820 -1,450Lease -250 -1,080 -2,330 -4,240 -6,770 -7,380 -7,712 -8,450 -9,320Corporate expense -185 -729 -1,602 -3,092 -4,751 -5,441 -5,573 -6,705 -7,411 Taxable income -526 -1,588 -2,693 -1,604 1,600 6,170 22,229 33,389 36,086 Tax loss carry forward 526 2,114 4,807 6,411 4,811 0 0 0 0Taxes 0 0 0 0 0 -543 -8,892 -13,356 -14,434Net income -526 -1,588 -2,693 -1,604 1,600 5,626 13,337 20,033 21,651

Parameters:Corporate tax rate 40%

Sales Growth 406.44% 156.37% 93.03% 53.65% 14.51% 22.91% 20.32% 10.53%

Exhibit 4: Teuer Furniture Balance Sheet2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

AssetsAccounts Receivable 0 751 3,479 8,675 16,946 25,272 29,059 36,625 42,421 48,200Inventory 671 3,151 8,216 15,125 20,908 21,715 24,868 26,808 29,216 33,343

Total Current Assets 671 3,902 11,695 23,800 37,853 46,987 53,927 63,433 71,637 81,543PPE 358 1,461 2,969 5,270 8,065 6,914 5,119 3,839 3,142 3,920

Total Assets 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Liabilities and EquityAccounts Payable 236 1,158 2,781 5,119 7,228 7,767 8,277 9,133 9,986 11,364Accrued Expenses 29 145 358 658 958 1,055 1,203 1,359 1,519 1,682

Total Current Liabilities 265 1,303 3,139 5,777 8,186 8,822 9,480 10,493 11,505 13,046Debt 0 0 0 0 0 0 0 0 0 0Equity 764 4,061 11,525 23,293 37,732 45,079 49,565 56,779 63,274 72,417

Total Liabilities and Equity 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Balance sheet check

Exhibit 5: Teuer Furniture Income Statement for Individual Showrooms # Avg Size 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

2003 1 17,200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

Sales 2,057 3,754 5,224 6,148 6,341 5,503 5,636 5,871 6,034 6,235 6,430 6,618 6,799 6,971 7,133 7,299

CGS 1,463 2,309 3,018 2,394 2,753 2,311 2,194 2,150 2,416 2,476 2,554 2,629 2,700 2,769 2,833 2,899

SGA 410 640 857 856 815 765 767 687 791 848 874 900 925 948 970 993

Advertising 203 334 399 434 422 423 391 401 457 449 463 477 490 502 514 526

Depreciation 72 72 72 72 72 0 0 0 65 65 65 65 65 0 0 0

Lease 250 250 250 250 250 250 302 302 302 302 302 302 365 365 365 365

2004 3 17,600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Sales 6,661 11,907 15,158 16,488 15,446 16,187 17,279 17,869 18,464 19,041 19,599 20,134 20,643 21,123 21,615

CGS 4,748 7,428 7,894 7,216 6,031 6,675 6,691 7,176 7,330 7,559 7,781 7,993 8,195 8,386 8,581

SGA 1,171 2,148 2,631 2,323 2,239 2,224 2,395 2,319 2,511 2,590 2,665 2,738 2,807 2,873 2,940

Advertising 685 971 1,266 1,213 1,235 1,241 1,245 1,287 1,329 1,371 1,411 1,450 1,486 1,521 1,556

Depreciation 235 235 235 235 235 0 0 0 187 187 187 187 187 0 0

Lease 830 830 830 830 830 830 1,003 1,003 1,003 1,003 1,003 1,003 1,212 1,212 1,212

2005 4 18,500 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Sales 9,570 16,651 19,785 20,951 22,847 24,451 24,499 25,315 26,108 26,872 27,605 28,303 28,962 29,636

CGS 6,978 10,917 11,430 8,499 9,387 9,857 9,042 10,050 10,365 10,668 10,959 11,236 11,498 11,765

SGA 1,953 2,977 3,371 3,039 3,021 3,228 3,693 3,443 3,551 3,655 3,754 3,849 3,939 4,030

Advertising 1,041 1,488 1,587 1,598 1,605 1,645 1,793 1,823 1,880 1,935 1,988 2,038 2,085 2,134

Depreciation 363 363 363 363 363 0 0 0 301 301 301 301 301 0

Lease 1,250 1,250 1,250 1,250 1,250 1,250 1,510 1,510 1,510 1,510 1,510 1,510 1,825 1,510

2006 5 21,100 1 2 3 4 5 6 7 8 9 10 11 12 13

Sales 13,583 21,142 23,592 29,702 34,105 34,824 35,984 37,110 38,197 39,239 40,231 41,167 42,125

CGS 9,526 11,229 13,594 9,902 13,259 13,932 14,286 14,733 15,164 15,578 15,972 16,343 16,724

SGA 2,767 4,016 4,237 3,780 4,895 4,946 4,894 5,047 5,195 5,337 5,471 5,599 5,729

Advertising 1,400 1,784 1,964 2,014 2,327 2,287 2,591 2,672 2,750 2,825 2,897 2,964 3,033

Depreciation 594 594 594 594 594 0 0 0 490 490 490 490 490

Lease 1,910 1,910 1,910 1,910 1,910 1,910 2,309 2,309 2,309 2,309 2,309 2,309 2,791

2007 6 22,100 1 2 3 4 5 6 7 8 9 10 11 12

Sales 15,435 22,001 30,466 39,628 43,541 45,542 46,967 48,343 49,662 50,917 52,102 53,315

CGS 11,205 14,801 16,422 15,232 17,856 18,080 18,646 19,192 19,716 20,214 20,685 21,166

SGA 3,050 3,878 5,471 5,166 5,917 6,194 6,388 6,575 6,754 6,925 7,086 7,251

Advertising 1,578 1,986 2,458 2,748 3,109 3,279 3,382 3,481 3,576 3,666 3,751 3,839

Depreciation 812 812 812 812 812 0 0 0 655 655 655 655

Lease 2,530 2,530 2,530 2,530 2,530 2,530 3,058 3,058 3,058 3,058 3,058 3,058

2008 2 15,500 1 2 3 4 5 6 7 8 9 10 11

Sales 3,187 5,176 7,244 9,257 10,461 10,921 11,241 11,547 11,839 12,115 12,397

CGS 2,053 3,467 4,421 3,764 4,153 4,336 4,462 4,584 4,700 4,809 4,921

SGA 522 951 1,225 1,243 1,423 1,485 1,529 1,570 1,610 1,648 1,686

Advertising 326 499 598 675 753 786 809 831 852 872 893

Depreciation 185 185 185 185 185 0 0 0 152 152 152

Lease 610 610 610 610 610 610 737 737 737 737 737

2009 1 14,500 1 2 3 4 5 6 7 8 9 10

Sales 1,437 2,507 3,540 4,481 5,054 5,266 5,410 5,546 5,676 5,808

CGS 1,021 1,652 1,887 1,779 2,007 2,091 2,148 2,202 2,253 2,306

SGA 257 480 615 609 687 716 736 754 772 790

Advertising 158 227 303 323 364 379 389 399 409 418

Depreciation 79 79 79 79 79 0 0 0 64 64

Lease 280 280 280 280 280 280 338 338 338 338

2010 2 14,700 1 2 3 4 5 6 7 8 9

Sales 3,008 5,300 7,288 9,207 10,364 10,778 11,050 11,307 11,570

CGS 2,226 3,526 4,096 3,655 4,115 4,279 4,387 4,489 4,593

SGA 623 1,028 1,261 1,252 1,410 1,466 1,503 1,538 1,574

Advertising 353 473 598 663 746 776 796 814 833

Depreciation 150 150 150 150 150 0 0 0 123

Lease 565 565 565 565 565 565 683 683 683

2011 2 15,400 1 2 3 4 5 6 7 8

Sales 3,354 5,879 8,069 10,174 11,430 11,863 12,139 12,421

CGS 2,357 3,745 4,535 4,039 4,538 4,709 4,819 4,931

SGA 701 1,076 1,396 1,384 1,555 1,613 1,651 1,689

Advertising 358 523 662 733 823 854 874 894

Depreciation 160 160 160 160 160 0 0 0

Lease 610 610 610 610 610 610 737 610

2012 3 16,300 1 2 3 4 5 6 7

Sales 5,379 9,411 12,891 16,223 18,191 18,842 19,280

CGS 3,814 5,995 7,245 6,441 7,222 7,480 7,654

SGA 1,038 1,722 2,230 2,206 2,474 2,562 2,622

Advertising 570 838 1,057 1,168 1,310 1,357 1,388

Depreciation 259 259 259 259 259 0 0

Lease 1,000 1,000 1,000 1,000 1,000 1,000 1,209

2013 2 16,000 1 2 3 4 5 6

Sales 3,622 6,326 8,647 10,861 12,155 12,590

CGS 2,568 4,029 4,860 4,312 4,825 4,998

SGA 699 1,158 1,496 1,477 1,653 1,712

Advertising 384 563 709 782 875 906

Depreciation 172 172 172 172 172 0

Lease 668 668 668 668 668 668

2014 2 16,000 1 2 3 4 5

Sales 3,731 6,503 8,872 11,122 12,447

CGS 2,097 2,582 3,522 4,416 4,941

SGA 720 1,190 1,535 1,513 1,693

Advertising 720 1,190 1,535 1,513 1,693

Depreciation 175 175 175 175 175

Lease 682 682 682 682 682

2015 2 15,000 1 2 3 4

Sales 3,597 6,257 8,520 10,680

CGS 1,428 2,484 3,382 4,240

SGA 694 1,145 1,474 1,453

Advertising 381 557 699 769

Depreciation 167 167 167 167

Lease 652 652 652 652

Parameters:Lease rate (2013) 20.88Lease inflation 2.0%

Exhibit 6: Teuer Furniture Balance Sheet for Individual Showrooms # Avg Size 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

2003 1 17,200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Cap expenditure 358 324

Accts receivable 751 1,187 1,665 1,975 2,040 1,700 1,745 1,742 1,902 2,020 2,083 2,144 2,203 2,259 2,311

Inventory 671 1,090 1,330 1,206 1,167 980 972 1,082 1,027 1,090 1,216 1,251 1,285 1,318 1,349 1,380

Accts payable 236 396 448 405 403 350 345 370 369 390 416 428 440 451 462 473

Accr expenses 29 49 62 61 61 53 54 57 58 58 64 66 68 70 71 73

PPE 260 195 130 65 0

2004 3 17,600 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14

Cap expenditure 1,175 936

Accts receivable 2,292 3,870 5,029 5,526 5,276 5,599 5,612 5,691 5,982 9,064 9,329 9,584 9,826 10,055

Inventory 2,061 3,590 4,304 3,352 2,851 3,042 3,248 3,397 3,619 3,598 3,704 3,805 3,901 3,992 4,085

Accts payable 762 1,255 1,421 1,124 1,025 1,090 1,124 1,139 1,153 1,232 1,268 1,303 1,336 1,367 1,399

Accr expenses 95 158 193 173 162 162 175 177 179 190 196 201 206 211 216

936 748 561 374 187 0

2005 4 18,500 0 1 2 3 4 5 6 7 8 9 10 11 12 13

Cap expenditure 1,814 1,506

Accts receivable 3,140 5,508 6,296 6,231 7,149 7,751 7,950 8,202 8,459 8,707 8,944 9,170 9,384

Inventory 3,296 5,271 4,640 3,975 4,075 4,427 4,354 5,114 4,934 5,078 5,217 5,349 5,473 5,600

Accts payable 1,078 1,760 1,742 1,381 1,523 1,572 1,565 1,631 1,689 1,739 1,786 1,832 1,874 1,918

Accr expenses 138 212 240 203 240 244 251 259 261 268 276 283 289 296

1,506 1,205 904 603 301 0

2006 5 21,100 0 1 2 3 4 5 6 7 8 9 10 11 12

Cap expenditure 2,971 2,450

Accts receivable 4,433 6,593 7,974 10,040 10,908 11,761 11,659 12,024 12,376 12,713 13,035 13,338

Inventory 4,344 6,518 6,635 5,870 6,689 6,854 6,348 7,013 7,218 7,415 7,603 7,779 7,960

Accts payable 1,533 2,227 2,181 1,889 2,165 2,325 2,377 2,401 2,472 2,539 2,603 2,664 2,726

Accr expenses 193 272 300 291 337 343 362 371 381 392 402 411 421

2,450 1,960 1,470 980 490

2007 6 22,100 0 1 2 3 4 5 6 7 8 9 10 11

Cap expenditure 4,058 3,277

Accts receivable 4,817 6,829 9,849 12,400 13,920 14,756 15,217 15,663 16,091 16,497 16,881

Inventory 5,232 6,246 8,710 7,320 8,121 9,022 8,876 9,135 9,385 9,622 9,846 10,075

Accts payable 1,732 2,480 2,712 2,631 2,712 2,919 3,039 3,128 3,214 3,295 3,372 3,450

Accr expenses 213 293 362 381 436 435 469 483 496 508 520 532

3,277 2,622 1,966 1,311

2008 2 15,500 0 1 2 3 4 5 6 7 8 9 10

Cap expenditure 924 761

Accts receivable 1,048 1,758 2,212 2,905 3,389 3,538 3,642 3,741 3,836 3,925

Inventory 1,028 1,711 2,147 1,727 1,911 2,064 2,124 2,182 2,237 2,289 2,343

Accts payable 349 547 662 586 690 707 727 747 766 784 802

Accr expenses 43 72 88 94 101 109 112 115 118 121 124

924 739 554 370 185 0 761 609 457

2009 1 14,500 0 1 2 3 4 5 6 7 8 9

Cap expenditure 394 322

Accts receivable 484 840 1,191 1,452 1,638 1,706 1,753 1,797 1,839

Inventory 488 882 881 823 955 995 1,022 1,048 1,073 1,097

Accts payable 171 261 327 281 327 341 350 359 367 376

Accr expenses 21 34 43 44 50 53 54 55 57 58

394 315 236 158 79 0 322 258

2010 2 14,700 0 1 2 3 4 5 6 7 8

Cap expenditure 752 616

Accts receivable 956 1,787 2,361 2,983 3,358 3,492 3,580 3,664

Inventory 1,013 1,787 1,913 1,740 1,959 2,037 2,088 2,137 2,186

Accts payable 348 577 683 596 671 697 715 732 749

Accr expenses 44 71 91 92 103 108 110 113 116

752 602 451 301 150 0 616

2011 2 15,400 0 1 2 3 4 5 6 7

Cap expenditure 798

Accts receivable 1,093 1,905 2,614 3,296 3,703 3,844 3,933

Inventory 1,067 1,795 2,158 1,923 2,160 2,242 2,294 2,347

Accts payable 387 623 739 658 740 768 786 804

Accr expenses 47 76 99 102 114 118 121 124

798 638 479 319 160 0

2012 3 16,300 0 1 2 3 4 5 6

Cap expenditure 1,293

Accts receivable 1,743 3,049 4,177 5,256 5,894 6,105

Inventory 1,708 2,854 3,448 3,066 3,438 3,561 3,643

Accts payable 617 977 1,181 1,050 1,177 1,219 1,248

Accr expenses 79 123 158 162 182 188 192

1,293 1,034 776 517 259 0

2013 2 16,000 0 1 2 3 4 5

Cap expenditure 860

Accts receivable 1,174 2,050 2,802 3,519 3,938

Inventory 1,918 2,313 2,053 2,297 2,379

Accts payable 657 792 703 787 815

Accr expenses 83 106 108 121 126

860 688 516 344 172 0

2014 2 16,000 0 1 2 3 4

Cap expenditure 876

Accts receivable 1,209 2,107 2,875 3,604

Inventory 1,229 1,677 2,102 2,352

Accts payable 421 574 720 805

Accr expenses 114 147 145 163

876 701 526 350 175

2015 2 15,000 0 1 2 3

Cap expenditure 837

Accts receivable 1,165 2,027 2,760

Inventory 1,182 1,610 2,018

Accts payable 405 551 691

Accr expenses 73 97 103

837 670 502 335

Exhibit 7: Teuer Furniture Cash Flow Assets 2003 2004 2005 2006 2007 2008 2009

Sales 2,057 10,415 26,701 51,540 79,191 90,680 - Costs -2,582 -12,003 -29,394 -53,144 -77,591 -84,510 - Taxes 0 0 0 0 0 -543Net income 0 -526 -1,588 -2,693 -1,604 1,600 5,626 - Capital expenditure -358 -1,175 -1,814 -2,971 -4,058 -924 -394 + Depreciation 0 72 307 669 1,264 2,075 2,188 - Increase in NWC -406 -2,193 -5,957 -9,467 -11,645 -8,498 -6,281Cash flow to assets -764 -3,823 -9,052 -14,461 -16,043 -5,747 1,139

5.4033317 2.7158396 1.5892057 1.2300833 0.7297668 0.7391534 1.3523104

2010 2011 2012111,451 134,093 148,218-89,222 -100,704 -112,132

-8,892 -13,356 -14,43413,337 20,033 21,651

-752 -1,122 -2,2292,032 1,820 1,450

-8,494 -7,192 -8,3656,123 13,539 12,508

0.8466941 1.1630737

Exhibit 8: Forecasting Sales Revenue and CostsYear 1 2 3 4 5 6 7 8

Sales growth 2003 73.6% 34.6% 19.5% 15.1% 0.2% 1.2% 1.0%2004 72.9% 29.2% 21.4% 8.1% 3.6% 3.4% 0.0%2005 76.6% 32.6% 22.2% 7.8% 3.7% -3.1%2006 73.8% 28.8% 24.4% 11.3% -1.3%2007 64.5% 36.8% 26.1% 6.3%2008 60.5% 35.6% 23.6%2009 69.0% 36.6%2010 70.4%2011

Average 70.2% 33.5% 22.9% 9.7% 1.5% 0.3%

Year 1 2 3 4 5 6 7 8CGS 2003 71.1% 61.5% 57.8% 38.9% 43.4% 42.0% 38.9% 36.6%

2004 71.3% 62.4% 52.1% 43.8% 39.0% 41.2% 38.7% 40.2%2005 72.9% 65.6% 57.8% 40.6% 41.1% 40.3% 36.9%2006 70.1% 53.1% 57.6% 33.3% 38.9% 40.0%2007 72.6% 67.3% 53.9% 38.4% 41.0%2008 64.4% 67.0% 61.0% 40.7%2009 71.0% 65.9% 53.3%2010 74.0% 66.5%2011 70.3%

Average 70.9% 63.7% 56.2% 39.7% 39.9% 39.5% 38.6%

Year 1 2 3 4 5 6 7 8SGA 2003 19.9% 17.1% 16.4% 13.9% 12.9% 13.9% 13.6% 11.7%

2004 17.6% 18.0% 17.4% 14.1% 14.5% 13.7% 13.9% 13.0%2005 20.4% 17.9% 17.0% 14.5% 13.2% 13.2% 15.1%2006 20.4% 19.0% 18.0% 12.7% 14.4% 14.2%2007 19.8% 17.6% 18.0% 13.0% 13.6%2008 16.4% 18.4% 16.9% 13.4%2009 17.9% 19.2% 17.4%

2010 20.7% 19.4%2011 20.9%

Average 19.3% 18.3% 17.3% 13.6% 13.6% 13.5% 13.4%

Year 1 2 3 4 5 6 7 8Advertising 2003 9.9% 8.9% 7.6% 7.1% 6.7% 7.7% 6.9% 6.8%

2004 10.3% 8.2% 8.3% 7.4% 8.0% 7.7% 7.2% 7.2%2005 10.9% 8.9% 8.0% 7.6% 7.0% 6.7% 7.3%2006 10.3% 8.4% 8.3% 6.8% 6.8% 6.6%2007 10.2% 9.0% 8.1% 6.9% 7.1%2008 10.2% 9.6% 8.3% 7.3%2009 11.0% 9.1% 8.6%2010 11.7% 8.9%2011 10.7%

Average 10.6% 8.9% 8.2% 7.2%

9-0.6%

940.0%

913.1%

97.6%

Exhibit 9: Forecasting InvestmentYear 1 2 3 4 5 6 7 8

Accounts Receivable 2003 36.5% 31.6% 31.9% 32.1% 32.2% 30.9% 31.0% 29.7%2004 34.4% 32.5% 33.2% 33.5% 34.2% 34.6% 32.5% 31.9%2005 32.8% 33.1% 31.8% 29.7% 31.3% 31.7% 32.4%2006 32.6% 31.2% 33.8% 33.8% 32.0% 33.8%2007 31.2% 31.0% 32.3% 31.3% 32.0%2008 32.9% 34.0% 30.5% 31.4%2009 33.7% 33.5% 33.6%2010 31.8% 33.7%2011 32.6%

Average 32.4%

Year 1 2 3 4 5 6 7 8Inventory 2003 45.9% 47.2% 44.0% 50.4% 42.4% 42.4% 44.3% 50.3%

2004 43.4% 48.3% 54.5% 46.4% 47.3% 45.6% 48.5% 47.3%2005 47.2% 48.3% 40.6% 46.8% 43.4% 44.9% 48.2%2006 45.6% 58.0% 48.8% 59.3% 50.4% 49.2%2007 46.7% 42.2% 53.0% 48.1% 45.5%2008 50.1% 49.4% 48.6% 45.9%2009 47.8% 53.4% 46.7%2010 45.5% 50.7%2011 45.3%

Average 47.6%

Year 1 2 3 4 5 6 7 8Accounts Payable 2003 16.1% 17.2% 14.8% 16.9% 14.6% 15.2% 15.7% 17.2%

2004 16.1% 16.9% 18.0% 15.6% 17.0% 16.3% 16.8% 15.9%2005 15.4% 16.1% 15.2% 16.2% 16.2% 15.9% 17.3%2006 16.1% 19.8% 16.0% 19.1% 16.3% 16.7%2007 15.5% 16.8% 16.5% 17.3% 15.2%2008 17.0% 15.8% 15.0% 15.6%2009 16.8% 15.8% 17.3%

2010 15.6% 16.4%2011 16.4%

Average 16.3%

Year 1 2 3 4 5 6 7 8Accrued Expenses 2003 4.7% 5.1% 4.9% 4.7% 4.9% 4.5% 4.6% 5.2%

2004 5.1% 5.1% 4.9% 4.9% 4.7% 4.7% 4.8% 4.9%2005 4.6% 4.7% 4.8% 4.4% 5.2% 5.0% 4.6%2006 4.6% 4.7% 4.8% 5.0% 4.7% 4.7%2007 4.6% 5.0% 4.6% 4.8% 4.8%2008 5.1% 5.0% 4.8% 4.9%2009 5.2% 4.8% 4.7%2010 4.5% 4.7%2011 4.4%

Average 4.8%

Nominal RealConstruction costs 2003 20.8 25.9

2004 22.3 26.82005 24.5 28.62006 28.2 32.02007 30.6 33.52008 29.8 32.62009 27.2 28.92010 25.6 26.82011 25.9 26.42012 26.4 26.42013 26.9 26.42014 27.4 26.42015 27.9 26.4

Nominal Real

Refresh cost 2003 90.6% 74.0%2004 79.6% 66.0%

Average 70.0%

931.5%

942.5%

915.3%

94.7%

Exhibit 10: Forecasting Parameters1 2 3 4 5 6 7

Sales growth 70.2% 33.5% 22.9% 9.7% 1.5% 0.3%CGS (% sales) 70.9% 63.7% 56.2% 39.7% 39.7% 39.7% 39.7%SGA (% sales, excluding dep & advertising) 19.3% 18.3% 17.3% 13.6% 13.6% 13.6% 13.6%Advertising (% sales) 10.6% 8.9% 8.2% 7.2% 7.2% 7.2% 7.2%Accounts Receivable (% sales) 32.4%Inventory (% next year's CGS) 47.6%Accounts Payable (% next year's CGS) 16.3%Accrued expenses (next year's SGA adv) 4.8%Depreciation (years) 5Refresh cost 70.0%Corporate tax rate 40.0%Corporate expenses 5.0%Discount rate 12.1%Long-term growth rate 3.5%Shares outstanding (K) 9,945

Teuer Furniture Pro Forma Income Statement2012 2013 2014 2015 2016 2017 2018 2019

Sales 148,218 165,028 181,941 199,623 217,575 231,545 242,363 251,183CGS -61,955 69,809 76,952 83,512 87,805 91,925 96,219 99,721SGA (exc adv & dep) -21,253 23,296 25,691 28,136 30,421 32,112 33,277 34,161 Advertising -10,744 12,238 13,464 15,061 16,596 17,674 18,247 18,882 Depreciation -1,450 1,084 1,373 1,959 2,631 2,559 2,178 1,828Lease (stores) -9,320 10,719 11,915 12,724 13,497 13,825 14,267 14,516Corp Expense (inc lease/adv) -7,411 8,251 9,097 9,981 10,879 11,577 12,118 12,559 Tax calculation -14,434 Tax loss carry forwards 0Taxes -14,434 15,852 17,380 19,300 22,298 24,749 26,423 27,807Net income 21,651 23,778 26,069 28,950 33,447 37,124 39,634 41,710

Parameters:Corporate tax rate 40%Corporate expenses 5%

Teuer Furniture Pro Forma Balance Sheet2012 2013 2014 2015 2016 2017 2018

AssetsAccounts Receivable 48,200 53,469 61,843 67,657 73,555 78,158 81,736Inventory 33,343 35,407 38,754 41,116 43,756 45,800 47,467

Total Current Assets 81,543 88,876 100,597 108,772 117,311 123,959 129,203Cash (balance) 0 17,226 29,982 49,198 76,905 110,055 146,624PPE 3,920 5,203 7,155 9,310 7,440 5,203 3,641

Total Assets 85,463 111,305 137,734 167,281 201,656 239,216 279,469

Liabilities and EquityAccounts Payable 11,364 12,247 12,772 13,449 14,462 15,085 15,632Accrued Expenses 1,682 2,862 2,698 2,617 2,531 2,345 2,417

Total Current Liabilities 13,046 15,109 15,469 16,066 16,994 17,430 18,049Debt 0 0 0 0 0 0 0Equity 72,417 96,196 122,265 151,215 184,662 221,786 261,420

Total Liabilities and Equity 85,463 111,305 137,734 167,281 201,656 239,216 279,469

Balance sheet check (A=L+E)

Teuer Furniture Pro Forma Cash Flow Assets 2012 2013 2014 2015 2016 2017

Sales 148,218 165,028 181,941 199,623 217,575 231,545 - Costs -112,132 -125,398 -138,492 -151,373 -161,829 -169,672 - Taxes -14,434 -15,852 -17,380 -19,300 -22,298 -24,749Net income 21,651 23,778 26,069 28,950 33,447 37,124 - Capital expenditure -2,229 -2,367 -3,325 -4,114 -761 -322 + Depreciation 1,450 1,084 1,373 1,959 2,631 2,559 - Increase in NWC -8,365 -5,269 -11,361 -7,579 -7,610 -6,212Cash flow assets 12,508 17,226 12,756 19,216 27,707 33,149

1 0.89 0.80 0.71 0.63 0.5612,508.10 15,367.05 10,150.53 13,641.07 17,545.66 18,726.10

PV ₹ 328,148.97Terminal value ₹ 440,109.09

Asset value 328,149Share value 33.00

Parameters:

Asset discount rate 12.1%Long-term growth rate 3.5%Shareholders (#) 187 Shares outstanding (K) 9,945

2018 2012 2013 2014 2015 2016 2017 2018242,363 TCA 81,543 88,876 100,597 108,772 117,311 123,959 129,203

-176,306 TCL 13,046 15,109 15,469 16,066 16,994 17,430 18,049-26,423 WC 68,497 73,766 85,128 92,707 100,317 106,528 111,15439,634 Increase in NWC 5,269 11,361 7,579 7,610 6,212 4,626

-6162,178

-4,62636,569

0.50240,210.5