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Business Valuation Assignment Sample

Trading Comparable

Company name

Share price

Eps

P/E

Tesco

256.7

14.7

17.46

Morrisons

252

13

19.38

Average

254.35

13.85

18.42

Valuation

Target company EPS

12.7

Average competitors P/E

20.71

Implied share price

276.57

Current share price

321

Upside from current share price

66.65

Company name

Share price

Eps

P/E

Sainsburry

321

12.7

25.29

Transaction comparable

Target Company name

Transaction date

Transaction value

EBITDA (million)

TV / EBITDA

Tesco

02/05/18

20239

270

74.9592592593

Morrisons

23/04/18

215331.144

806

267.1602282878

Target Company name

Transaction value

EBITDA (million)

TV / EBITDA

Target company sainsburry

160347523

121

1325186.14049587

Discounted cash flow model

Tax Rate

35.0%

Net Debt

$83.4

Shares

35.021

Unlevered Free Cash Flow Calculation

Calendar Year Ending December 31,

CAGR

2007A

2008P

2009P

2010E

2011E

2012E

2008-2012

EBIT

$120.0

$126.2

$133.2

$137.7

$142.4

$147.3

3.9%

Plus: Non-deductible Goodwill Amort.

-

-

-

-

-

-

EBITA

$120.0

$126.2

$133.2

$137.7

$142.4

$147.3

3.9%

Less: Provision for Taxes

(42.0)

(44.2)

(46.6)

(48.2)

(49.9)

(51.6)

Unlevered Net Income

$78.0

$82.0

$86.6

$89.5

$92.6

$95.8

3.9%

Plus: D&A (excl. non-deductible GW amort.)

15.3

15.9

16.7

16.0

15.6

15.4

Less: Capital Expenditures

(18.0)

(16.0)

(14.1)

(14.6)

(15.1)

(15.6)

Less: Increase in Net Working Capital

(9.5)

8.3

3.1

3.2

3.3

3.4

Unlevered Free Cash Flow

$65.8

$90.2

$92.3

$94.2

$96.4

$99.0

2.3%

Total Enterprise Value

Total Equity Value

Terminal EBITDA Multiple

Terminal EBITDA Multiple

7.5x

8.0x

8.5x

7.5x

8.0x

8.5x

Discount

10.0%

$1,042.4

$1,088.1

$1,133.9

Discount

10.0%

$959.0

$1,004.7

$1,050.5

Rate

11.0%

1,003.0

1,046.7

1,090.4

Rate

11.0%

919.6

963.3

1,007.0

(WACC)

12.0%

965.5

1,007.3

1,049.1

(WACC)

12.0%

882.1

923.9

965.7

Implied Perpetuity Growth Rate

Total Price Per Share

Terminal EBITDA Multiple

Terminal EBITDA Multiple

7.5x

8.0x

8.5x

7.5x

8.0x

8.5x

Discount

10.0%

1.0%

1.5%

1.9%

Discount

10.0%

$27.38

$28.69

$30.00

Rate

11.0%

1.9%

2.4%

2.9%

Rate

11.0%

26.26

27.51

28.75

(WACC)

12.0%

2.8%

3.3%

3.8%

(WACC)

12.0%

25.19

26.38

27.58

DCF Analysis (2008-2012): Perpetuity Growth Method

Total Enterprise Value

Total Equity Value

Terminal Perpetuity Growth Rate

Terminal Perpetuity Growth Rate

3.0%

3.5%

4.0%

3.0%

3.5%

4.0%

Discount

10.0%

$1,260.8

$1,335.1

$1,421.7

Discount

10.0%

$1,177.4

$1,251.7

$1,338.3

Rate

11.0%

1,103.6

1,158.0

1,220.1

Rate

11.0%

1,020.2

1,074.6

1,136.7

(WACC)

12.0%

981.4

1,022.5

1,068.8

(WACC)

12.0%

898.0

939.1

985.4

Implied Terminal EBITDA Multiple

Total Price Per Share

Terminal Perpetuity Growth Rate

Terminal Perpetuity Growth Rate

3.0%

3.5%

4.0%

3.0%

3.5%

4.0%

Discount

10.0%

9.9x

10.7x

11.6x

Discount

10.0%

$33.62

$35.74

$38.22

Rate

11.0%

8.7x

9.3x

10.0x

Rate

11.0%

29.13

30.68

32.46

(WACC)

12.0%

7.7x

8.2x

8.7x

(WACC)

12.0%

25.64

26.82

28.14

(1) Assumes net debt of $83.4mm as of 5/16/08.

(2) Assumes outstanding diluted shares of 35.021 million.

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