Fullbridge Program iPads in China template

iPad Distributor in China - DCF Analysis 

Assumptions

Initial Investment

 $        10 000 000

Income Statement Components

Projected sales volume 2011

                 100 000

units

Sales volume growth rate (2012-2015)

15%

iPad Retail Price

 $                     700

Change in retail price per year

-5%

iPad Wholesale Price

 $                     500

Change in wholesale price per year

-3%

Initial Gross Margin

29%

Operating Expenses 

11%

as a percent of sales (note includes depreciation)

Initial Operating Margin

18%

Balance Sheet Components

Depreciation (% of Cumulative Gross PP&E)

10%

assuming a 10 year depreciation schedule

Year 1 Capital Expenditures

 $          5 000 000

Growth in Capital Expenditures per year

5%

Net Working Capital

4%

as a percent of sales

Tax rate

35%

Discount Rate 

11,76%

Perpetuity Growth Rate

3,00%

Projected

2011

2012

Summary Income Statement

Sales 

iPad (volume)

               100 000

iPad (price)

 $                    700

iPad (revenue)

 $      70 000 000

Gross Profit

 $      20 000 000

Operating Profit

 $      12 300 000

Taxes

 $      (4 305 000)

Net Income

 $         7 995 000

Key Balance Sheet Data

Net working Capital

 $         2 800 000

Cumulative Gross PP&E - Beginning of Year

 $                       -  

Plus Capital Expenditures

 $         5 000 000

Cumulative Gross PP&E - End of Year

 $         5 000 000

2011

2012

Free Cash Flow 

EBIAT (Operating Profit * (1-Tax Rate))

 $         7 995 000

+ Depreciation (10% of Cumulative Gross PP&E-EOY)

 $            500 000

- Capital Expenditures

 $      (5 000 000)

- Change in Net Working Capital

 $      (2 800 000)

= Free Cash Flow

 $            695 000

Terminal Value (growing perpetuity)

Total Free Cash Flows

 $            695 000

 $                       -  

Discount Rate

Perpetuity Growth Rate

NPV of Future Cash flows

Less Initial Investment

Enterprise Value