Corporate Finance (3 page report excluding calculation explanation)

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Financial History

START HERE		Enter data in the yellow cells only. Comments to help you are in blue or red font. Take one row at a time.
	CURRENCY:	USD	<-- This is the organization's home or functional currency. E.g., USD, INR (Indian Rupee), BRL (Brazilian Real), EUR (Euro), CNY (Chinese Yuan). Information is found on financial statements.
	SCALING: x	1,000	<-- Local currency units: Could be 1 (so 1 means 1), 1000 (so 1 = 1,000), or 1,000,000 (so 1 = 1.0 million). Usually 1000 is used. Information is found on financial statements.
Starbucks Corporation							<--	Any financial report should show the name of the organization in the heading.
INCOME STATEMENT HIGHLIGHTS							<--	Always identify the type of report.
Unaudited; Amounts USD x 1000							<--	The currency and scaling needs to be defined.
For Fiscal Years ended			October	[Day]			<--	An organization's fiscal year might end on Dec 31, or June 30, or something else. State it here.
					% Growth vs Prior Year
		2016	2015	2014	2016	2015	<--	Replace leftmost year number (Cell C9) with most recent year of data available.
TOTAL REVENUE		$ 21,315,900.0	$ 19,162,700.0	$ 16,447,800.0	11.2%	16.5%
Cost of Goods Sold		$ 8,511,100.0	$ 7,787,500.0	$ 6,858,800.0	9.3%	13.5%
Gross Profit or (Loss)		$ 12,804,800.0	$ 11,375,200.0	$ 9,589,000.0	12.6%	18.6%
Other Operating Expenses		$ 8,632,900.0	$ 7,774,200.0	$ 6,507,900.0	11.0%	19.5%
OPERATING INCOME		$ 4,171,900.0	$ 3,601,000.0	$ 3,081,100.0	15.9%	16.9%
Interest Income or (Expense), Net		$ 108,000.0	$ 372,500.0	$ 142,700.0	-71.0%	161.0%	<--	Be sure to enter interest income as a positive number; interest expense as a negative number.
Other Income or (Expense), Net		$ (81,300.0)	$ (70,500.0)	$ (64,100.0)	-15.3%	-10.0%	<--	Be sure to enter other income as a positive number, other expense as a negative number.
Income before Tax Provision		$ 4,198,600.0	$ 3,903,000.0	$ 3,159,700.0	7.6%	23.5%
Provision for Income Taxes		$ 1,511,496.0	$ 1,143,700.0	$ 1,092,000.0	32.2%	4.7%
Net Income or (Loss) from Continuing Operations		$ 2,687,104.0	$ 2,759,300.0	$ 2,067,700.0	-2.6%	33.4%	<--	FYI, most analysts consider this better than total Net Income as an indicator of underlying business performance.
Discontinued Operations Income (Loss), Net		$ - 0	$ - 0	$ - 0	0.0%	0.0%	<--	Typically, from shutting down or selling part of the business.
NET INCOME OR (LOSS)		$ 2,687,104.0	$ 2,759,300.0	$ 2,067,700.0	-2.6%	33.4%	<--	Confirm this matches what is listed on the financial statement you downloaded.
Average Diluted Shares Outstanding		$ 1,900,000.0	$ 1,820,000.0	$ 1,350,000.0	4.4%	34.8%	<--	Make sure this value is scaled the same way as the other numbers (thousands or millions).
DILUTED EARNINGS OR (LOSS) PER SHARE		$ 1.41	$ 1.52	$ 1.53	-6.7%	-1.0%
Net Income Margin %		12.6%	14.4%	12.6%			<--	Net income or Loss / Total Revenue. Typical values are 2% to 20%, but it can be negative, too.
Common Stock Share Price at each Year-End		$ 55.52	$ 60.03	$ 41.03	-7.5%	46.3%	<--	Mergent Online instructions include how to find historical stock prices. Go back four years because you will need fourth year for Line 123.
Total Equity Value (= share price x shares)		$ 105,488,000.0	$ 109,254,600.0	$ 55,390,500.0			<--	Better to use end-of-year shares outstanding, but this figure is close enough for this course.
Price / Earnings Ratio (P/E)		39.26	39.60	26.79	-0.9%	47.8%	<--	Market price at the end of the year divided by that year's earnings per share. Typical values are 10 to 30.
Source: [Title (May 20th). Retrieved from https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm#sA81B26E970E8EBC307543265204EBB47							<--	Include APA citation for where you found the financial statement data.
Starbucks Corporation
CASH FLOW STATEMENT HIGHLIGHTS
Unaudited; Amounts USD x 1000
For Fiscal Years ended October [Day]
					% Growth vs Prior Year
		2016	2015	2014	2016	2015
Net Income or (Loss), from Above		$ 2,687,104.00	$ 2,759,300.00	$ 2,067,700.00	-2.6%	33.4%
Depreciation and Amortization Expense		$ 1,030,100.00	$ 933,800.00	$ 748,400.00	10.3%	24.8%	<--	This is a noncash expense, so we add it back to net income here.
Other Operating Sources and (Uses)		$ 857,896.00	$ 56,000.00	$ (2,208,300.00)	1432.0%	102.5%	<--	These are working capital changes and other adjustments.
Cash Flow from Operating Activities		$ 4,575,100.00	$ 3,749,100.00	$ 607,800.00	22.0%	516.8%	<--	By entering the total here, the row above will be automatically calculated.
(Capital Expenditures, Net of Disposals)		$ (2,247,800.00)	$ (1,242,800.00)	$ (798,600.00)	-80.9%	-55.6%	<--	This is normally a negative number.
Other Investing Activities		$ 24,900.00	$ (277,500.00)	$ (19,100.00)	109.0%	-1352.9%	<--	This is normally a negative number.
Cash Flow from Investing Activities		$ (2,222,900.00)	$ (1,520,300.00)	$ (817,700.00)	-46.2%	-85.9%	<--	This is normally a negative number.
Increase or (Decrease) in Debt		$ 1,254,500.00	$ 238,400.00	$ 748,500.00	426.2%	-68.1%	<--	Borrowing money is a source of cash; repaying it is a use of cash.
(Dividend Payments)		$ (3,012,900.00)	$ (2,533,100.00)	$ (1,402,000.00)	-18.9%	-80.7%	<--	Dividend payments should normally be a negative number, because they are a cash outflow.
Other Financing Activities		$ (114,400.00)	$ (93,600.00)	$ (84,200.00)	-22.2%	-11.2%
Cash Flow from Financing Activities		$ (1,872,800.00)	$ (2,388,300.00)	$ (737,700.00)	21.6%	-223.7%
Cumulative Translation Adjustment		$ - 0	$ - 0	$ - 0	0.0%	0.0%	<--	Don't try to understand what this number means at this time. It is applicable to most multicurrency organizations.
NET CASH FLOW		$ 479,400.00	$ (159,500.00)	$ (947,600.00)	400.6%	83.2%	<--	Confirm this matches what is listed on the financial statement you downloaded.
Memo: Free Cash Flow		$ 2,327,300.00	$ 2,506,300.00	$ (190,800.00)	-7.1%	1413.6%	<--	Usually defined as Cash Flow from Operating Actitivies less Capital Expenditures. Note: If the latter is a negative number, then the formula is Op Cash Flow + Cap Exp, e.g., 1,000 + -100 = 900. Free Cash Flow must be less than Operating Cash Flow.
Source: [Title (May 20th). Retrieved from https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm#sA81B26E970E8EBC307543265204EBB47
Starbucks Corporation
BALANCE SHEET HIGHLIGHTS
Unaudited; Amounts USD x 1000
For Fiscal Years ended October [Day]
					% Growth vs Prior Year
		2016	2015	2014	2016	2015
Current Assets
	Cash and Marketable Securities	$ 2,128,800.00	$ 1,530,100.00	$ 1,708,400.00	39.1%	-10.4%
	Accounts Receivable, Net	$ 768,800.00	$ 719,000.00	$ 948,400.00	6.9%	-24.2%	<--	These amounts are for invoices the organization has sent to clients, but that they have not yet paid.
	All Other Current Assets	$ 1,862,900.00	$ 1,721,900.00	$ 1,511,900.00	8.2%	13.9%
	Total Current Assets	$ 4,760,500.00	$ 3,971,000.00	$ 4,168,700.00	19.9%	-4.7%	<--	Enter total current assets values, and the spreadsheet will calculate "other current assets."
Non-current Assets
	Property, Plant and Equipment, Net	$ 4,533,800.00	$ 4,088,300.00	$ 3,519,000.00	10.9%	16.2%	<--	These are for PP&E net of accumulated depreciation.
	Goodwill and Other Intangible Assets	$ 1,719,600.00	$ 1,575,400.00	$ 856,200.00	9.2%	84.0%	<--	Includes intellectual property (IP), such as patents and acquired technology.
	Other Non-current Assets	$ 3,315,600.00	$ 2,781,600.00	$ 2,209,000.00	19.2%	25.9%
	Total Non-current Assets	$ 9,569,000.00	$ 8,445,300.00	$ 6,584,200.00	13.3%	28.3%
TOTAL ASSETS		$ 14,329,500.00	$ 12,416,300.00	$ 10,752,900.00	15.4%	15.5%	<--	Enter Total Assets, and the spreadsheet will calculate Total Noncurrent Assets and Other Noncurrent Assets.
Current Liabilities
	Accounts Payable, Net	$ 2,975,700.00	$ 2,664,300.00	$ 2,244,200.00	11.7%	18.7%	<--	These are for bills the organization has received but not yet paid.
	Other Current Liabilities	$ 1,571,200.00	$ 983,800.00	$ 794,500.00	59.7%	23.8%
	Total Current Liabilities	$ 4,546,900.00	$ 3,648,100.00	$ 3,038,700.00	24.6%	20.1%
Non-current Liabilities
	Long-term Debt	$ 3,202,200.00	$ 2,347,500.00	$ 2,048,300.00	36.4%	14.6%
	Other Non-current Assets	$ 696,400.00	$ 602,700.00	$ 393,900.00	15.5%	53.0%
	Total Non-current Liabilities	$ 3,898,600.00	$ 2,950,200.00	$ 2,442,200.00	32.1%	20.8%
TOTAL LIABILITIES		$ 8,445,500.00	$ 6,598,300.00	$ 5,480,900.00	28.0%	20.4%
SHAREOWNERS' EQUITY
	Common Stock, at par	$ 1,500.00	$ 1,500.00	$ 700.00
	Additional Paid-in Capital	$ 41,100.00	$ 41,100.00	$ 38,400.00
	Retained Earnings	$ 5,949,800.00	$ 5,974,800.00	$ 5,206,600.00
	CTA and Other	$ (108,400.00)	$ (199,400.00)	$ 26,300.00
	TOTAL SHAREOWNERS' EQUITY	$ 5,884,000.00	$ 5,818,000.00	$ 5,272,000.00			<--	By definition, shareowners' equity equals total assets minus total liabilities. Confirm this matches what is listed on the financial statement you downloaded.
Source: [Title (May 20th). Retrieved from https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm#sA81B26E970E8EBC307543265204EBB47
Starbucks Corporation
SELECTED FINANCIAL RATIOS
Unaudited; Amounts USD x 1000
For Fiscal Years ended October [Day]
					% Growth vs Prior Year
		2016	2015	2014	2016	2015
FINANCIAL RATIOS
	Price / Earnings Ratio	39.3	39.3	39.3	0.0%	0.0%	<--	Price per Share / Earnings per Share. Typical values are 10 to 40.
	Debt / Equity Ratio	1.4	1.4	1.4	0.0%	0.0%	<--	Total Liabilities / Total Shareowners' Equity. Typical values are 0.2 to 0.6.
	Return on Equity (ROE) %	45.7%	45.7%	45.7%	0.0%	0.0%	<--	Net Income / Total Shareowners' Equity. Typical values are 2% to 40%.
	Return on Assets (ROA) %	18.8%	18.8%	18.8%	0.0%	0.0%	<--	Net Income / Total Assets. Typical values are 2% to 40%. Almost always LOWER than ROE.
	Net Profit Margin %	12.6%	12.6%	12.6%	0.0%	0.0%	<--	Net Income / Total Revenue. Typical values are 1% to 15%.
	Free Cash Flow	$ 2,327,300.00	$ 2,327,300.00	$ 2,327,300.00	0.0%	0.0%	<--	Net Cash Flow minus Capital Expenditures. Value is almost always LESS THAN net cash flow.
OTHER USEFUL RATIOS
	Earnings per Share or EPS	$ 1.4143	$ 1.4143	$ 1.4143	0.0%	0.0%	<--	Net Income / Diluted Shares Outstanding. Typical values are $1.00 to $10.00. May also be negative.
	Current Ratio	1.0	1.0	1.0	0.0%	0.0%	<--	Current Assets / Current Liabilities. Typical values are 0.7 to 1.5.
	Days Sales Outstanding (DSO)	13	13	13	0.0%	0.0%	<--	(Accounts Receivable / Total Revenue) x 365. Typical values are 5-120. Lower is better.
COMMON STOCK PRICE
	Adjusted Close Price on or near October [Day]	$ 55.52	$ 60.03	$ 41.03	-7.5%	46.3%	<--	Usually, somewhere between a few dollars and a couple of hundred dollars per share.
RATE OF RETURN CALCULATIONS		2013	2014	2015	2016	Pct Change	<--	Need fiscal end-of-year information for four years to calculate three-year percentage change.
	Adjusted Close Price at fiscal End of Year (EOY)	$ 78.39			$ 55.52	-29.2%	<--	For this, ROR% = ($End - $Beg) / $Beg. More precisely, you would add dividends received to the $End value.
	Annual Dividends per Share		$ (1.5857)	$ (1.5857)	$ (1.5857)		<--	Approximate dividends/share are calculated here, but you may want to override those with disclosed div/share figures.
	If you buy 1 share at end of fiscal 78.39, collect dividends, then sell at end of fiscal 2016, your 3-year percent gain would be:					-35.2%	<--	Not required here, but a more complete measurement.
BUT WHAT IF WE VIEW THIS AS A TIME VALUE OF MONEY QUESTION?
	Investor's Annual Cash Flow for 1 Share	$ (78.39) C. Jeffrey Smith: This is negative because we're assuming you pay this out to buy your 1 share of stock.	$ (1.59)	$ (1.59)	$ 53.93		<--	For an investor who buys 1 share at beginning, collects dividends, then sells at end of third year.
	Solve for the annual Internal Rate of Return or IRR, with N=3 Yrs				-13.1% C. Jeffrey Smith: This will always be LESS THAN 1/3 of the total 3-yr Percent Change figures above. Why? Because of COMPOUNDING.		<--	This IRR is the best overall measure of this stock's performance over the time period.
Source: [Title (May 20th). Retrieved from https://www.sec.gov/Archives/edgar/data/829224/000082922416000083/sbux-1022016x10xk.htm#sA81B26E970E8EBC307543265204EBB47

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Capital Structure

This tab is used to calculate Weighted Average Cost of Capital (WACC). Enter data in the yellow cells only. Comments to help you are indicated by a red triangle in the top right corner of cell; hover over the cell to review.
Enter Company Full Name:		Starbucks Corporation
Enter Fiscal Year:		2016
Starbucks Corporation
CAPITAL STRUCTURE
For End of Fiscal Year 2016
Unaudited; Amounts USD x 1000
SIMPLE METHOD								TEXTBOOK METHOD
		Capital Funding Amount C. Jeffrey Smith: C. Jeffrey Smith: All of the funds the organization has received from banks, bond-buyers, stockholders, and other investors.	Cost of Capital: Estimated % Return Req'd by Investors	Corporate Marginal Tax Rate % C. Jeffrey Smith: C. Jeffrey Smith: Always 0% for stock and retained earnings; may be 0% - 50% for debt and leases.	1 - Corp Tax Rate	% Cost of Capital, After Tax Savings C. Jeffrey Smith: C. Jeffrey Smith: Equals Column D times column F.	$ Cost of Capital per Year (Column C x Coumn G)	Wgt x Cost	% of Total
Debt: Bank Loans		$ 750,000,000.0	2.1%	32.9%	67.1%	1.4%	$ 10,574,550.0	0.5%	33.2%
Debt: Bonds		500,000,000.0	2.5%	32.9%	67.1%	1.6%	8,224,650.0	0.4%	22.2%
Debt: Commercial Paper		1,000,000,000.0	0.0%	32.9%	67.1%	0.0%	- 0	0.0%	44.3%
Debt: Other or Unidentified		- 0	0.0%	32.9%	67.1%	0.0%	- 0	0.0%	0.0%
Leases (a form of Debt)		1,223,200.0	0.0%	32.9%	67.1%	0.0%	- 0	0.0%	0.1%
Preferred Stock (if any)		- 0	0.0%	0.0%	100.0%	0.0%	- 0	0.0%	0.0%
Common Stock: At Par		1,500.0	0.0%	0.0%	100.0%	0.0%	- 0	0.0%	0.0%
Common Stock: Add'l Paid-in Capital		41,100.0	0.0%	0.0%	100.0%	0.0%	- 0	0.0%	0.0%
Retained Earnings		5,949,800.0	0.0%	0.0%	100.0%	0.0%	- 0	0.0%	0.3%
[Other]		- 0	0.0%	0.0%	100.0%	0.0%	- 0	0.0%	0.0%
TOTAL		$ 2,257,215,600.0				?	$ 18,799,200.0	0.8%	100.0% C. Jeffrey Smith: C. Jeffrey Smith: The % of Total should always add up to 100.0%. If not, you've done something wrong.
						C. Jeffrey Smith: C. Jeffrey Smith: Equals Column D times column F.	WEIGHTED AVERAGE COST OF CAPITAL:
WACC = [$ Total Annual Cost of Capital] / [$ Total Capital Funding] =					$18799200 / $2257215600	=	0.8%
TOTAL DEBT AND EQUITY		Amount	Pct of Total
Total Debt, incl. Leases & Preferred Stock		2,251,223,200.0	99.7%			So Debt/Equity Ratio =	375.7
Total Equity, incl "Other"		5,992,400.0	0.3%			And Debt/Total Capital Ratio =	1.0
TOTAL		$ 2,257,215,600.0	100.0%
NOTES:
a)	The Corporate Marginal Tax Rate only affects debt and leases. For businesses, it is usually between 0% and 50%. For nonprofits and goverments, it is always 0%.
b)	Leases are a form of debt.
c)	The % annual cost of debt is always less than the % annual cost of equity.
d)	Retained Earnings are basically common stock dividends that have not been paid out. Retained earnings therefore have the same required rate of return as common stock.
e)	The organization's treasurer should be the best source for all of this information.
HOW TO ESTIMATE REQUIRED RATE OF RETURN FOR COMMON STOCK
Dividend Growth Model:		($Dividend / $Current Price) + Expected % Dividend Growth Rate				<-- Only works if constant future growth is expected.
	Example:	($1.50 / $20.00) + 6.5% = 0.075 + 0.065 = 0.140 = 14.0%
Intrinsic Value Method		The internal rate of return (IRR) of the future cash flows investors expect to receive. Use a spreadsheet IRR function to calculate.
Industry Averages		Evaluate reasonable estimates for industry averages or for other organizations with similar risk. Not easy, by the way.

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Valuation

This tab is used for the corporate valuation report (Final Project I). Enter data in the yellow cells only.
			CURRENCY:	USD	<-- Probably U.S. dollars, or perhaps another (e.g., euros or pesos). We will use U.S. dollars.
			SCALING: x	1,000	<-- Could be x1 (such as just dollars), x1000 (meaning amounts in Thousands), or Millions (meaning amounts in millions). We will use x1000.
Starbucks Corporation - COMPANY VALUATION
(Unaudited; USD 1000)
			Fiscal Year -->	2016	2017	2018	2019	2020	2021	2022	2023	2024	2025	2026	Total
REVENUE				21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	21,315,900	234,474,900
	Growth Rate vs Prior Year			11.2%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Total Operating Expenses				17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	17,144,000	188,584,000
OP INCOME OR (LOSS)				4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	45,890,900
	Operating Margin			19.6%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%	0.0%
Interest & Other Income (Exp)				26,700	0	0	0	0	0	0	0	0	0	0	26,700
PRETAX INCOME OR (LOSS)				4,198,600	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900	4,171,900
Tax Provision				1,511,496	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	1,501,884	16,530,336
Discont'd Ops Income (Loss)				0	0	0	0	0	0	0	0	0	0	0	0
NET INCOME OR (LOSS)				2,687,104	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	29,387,264
Diluted Avg Shares				1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000	1,900,000
DILUTED EPS				$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 1.41	$ 15.47
Net Income or (Loss), from Above				2,687,104	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	29,387,264
Deprec'n & Amortiz'n Expense				1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	1,030,100	11,331,100
Other Op Sources & (Uses)				857,896	857,896	857,896	857,896	857,896	857,896	857,896	857,896	857,896	857,896	857,896	9,436,856
Cash Flow from Op Activities				4,575,100	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	4,558,012	50,155,220
(Capital Expenditures, Net of Disposals)				(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(2,247,800)	(24,725,800)
Other Investing Activities				24,900	24,900	24,900	24,900	24,900	24,900	24,900	24,900	24,900	24,900	24,900	273,900
Cash Flow from Invest'g Activities				(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(2,222,900)	(24,451,900)
Increase or (Decrease) in Debt				1,254,500	0	0	0	0	0	0	0	0	0	0	1,254,500
(Dividend Payments)				(3,012,900)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(32,950,302)
Other Financing Activities				(114,400)	0	0	0	0	0	0	0	0	0	0	(114,400)
Cash Flow from Financ'g Activities				(1,872,800)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(2,993,740)	(31,810,202)
Cumulative Translation Adjustment				0	0	0	0	0	0	0	0	0	0	0	0
NET CASH FLOW				479,400	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(6,106,882)
Memo: Free Cash Flow				2,327,300	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	2,310,212	25,429,420
VALUATION CALCULATIONS
NET CASH FLOW "NCF"				479,400	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(6,106,882)	For the project analysis, we EXCLUDE the funding proceeds & repayment.
NET PRESENT VALUE OF FUTURE CASH FLOWS
NPV		@	5.0%	$(5,085,752)		For low-risk companies. The value here is what you would be willing to pay to buy the company under these assumptions.
NPV		@	10.0%	$(4,046,985)		For medium-risk companies. The value here is what you would be willing to pay to buy the company under these assumptions.
NPV		@	18.0%	$(2,959,932)		For high-risk companies. The value here is what you would be willing to pay to buy the company under these assumptions.
If you had bought the whole company at the end of fiscal 2016 for its actual market value of --->										$105,488,000	(From Financial History worksheet)
Net Cash Flow w/ Investment				(105,488,000)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(658,628)	(112,074,282)
Cumulative NCF				(105,488,000)	(106,146,628)	(106,805,256)	(107,463,885)	(108,122,513)	(108,781,141)	(109,439,769)	(110,098,397)	(110,757,025)	(111,415,654)	(112,074,282)
	CF/Mth for Payback Calc				0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00	0.00
Cash Flow Payback Period				11.00	Years	After that many years, the cumulative cash flow turns positive. (It could turn negative again in one or more future years.)										If cumulative NCF has more than 1 change from - to +, payback period may be wrong.
Internal Rate of Return				ERROR:#NUM!	IRR	At this discount rate R, the NPV will equal $0. IRR is a bit dangerous, because there can be more than one solution.
MODIFIED INTERNAL RATE OF RETURN (MIRR)
	Financing Rate			0.0%	<-- This is the assumed cost to obtain financing. It could be the firm's cost of equity.
	Reinivestment Rate			ERROR:#NUM!	<-- This is the assumed rate of return you would earn on excess funds. It might or might not equal the IRR from above.
	MIRR			ERROR:#NUM!	MIRR
ECONOMIC VALUE ADDED (EVA), ALSO CALLED ECONOMIC PROFIT
	Net Income (from above)			2,687,104	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	2,670,016	29,387,264
	Invested Capital			2,400		From Financial History: Common Stock, at Par + Additional Paid-in Capital =						$1,500	+	$ 900.00
	WACC			0.8%		From Capital Structure spreadsheet
	EVA			2,687,084	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	2,669,996	29,387,044	EVA = Net Income - (Invested Capital x WACC)
NOTES:				Projections of future cash flows are always uncertain; consider doing several scenarios of cash flows, such as most likely, best case,
				and worst case.
				You should use a low discount rate to calculate NPV for low-risk projects such as replacing equipment; perhaps 5%. Use a higher rate, such as
				10%, for medium-risk projects, and use a higher rate of, say, 15% or 20% for the riskiest projects. Ask the company treasurer.
				The formula for calculating EVA is: Net Operating Profit After Taxes (NOPAT) - Invested Capital * Weighted Average Cost of Capital (WACC)

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Optional - TVM Help

Time Value of Money (TVM) - Simple Calculators
Enter known values in YELLOW cells.			Answers will be in GREEN cells.
GENERAL RULES AND DEFINITIONS
-	Show cash you give to someone else (e. g., your bank), or outflows, as negative numbers; and show cash you receive, or inflows, as positive numbers.
-	Be clear and consistent about time periods: Are you doing everything in years, months, or some other intervals?
PV	Present Value. What is happening today, or what something is worth today.
N	Number of Periods. The number of years or months, or even weeks or days, you are looking at.
R	Rate of Return; or interest rate (sometimes labeled "i" instead of "r"). This is also the "compounding rate" (when going from the present to the future) or the
	"discount rate" (when going from the future to the past). e.g., 7.5% annual rate. Remember 7.5% is same as 0.075.
PMT	Annuity or Amortization Payment. Sometimes you are looking at a periodic loan repayment or a periodic savings or investing amount.
TYPE	TVM Type. Whether compounding or discounting is applied at the end of each period, as usually occurs with your savings accounts (usually "Type = 0"); or
	whether compounding or discounting is applied at the beginning of each period, as is common with loans ("Type = 1").
GENERAL STEPS TO SOLVE TVM PROBLEMS
1a	Methodology: Understand the question, identify the relevant information, and, if required, make appropriate assumptions.
1b	Methodology: Draw a timeline and write down the values for the items you know. Show the units and be consistent. e.g., if periods (N) are in months,
	say so, and make sure your rate of return R is also in months. Don't write "PV=$1 million" and then "FV="$1,200,000."
2	Calculation: Enter the known TVM values and calculate the unknown, using either the appropriate table below, a hand calculator, an online
	TVM calculator site, a TVM smartphone app, or your own Excel or OpenOffice or Google Docs spreadsheet.
3	Interpretation: Do a "does this all make sense?" check. If not, redo. Interpret your final answer. What does it mean? Why does it make sense?
4	Communication: Explain the question, your methodology, and your answer clearly, as if you are trying to convince your boss!
TO CALCULATE THE FUTURE VALUE OF A PRESENT AMOUNT								Formula: FV = PV (1 + R)^N
Example: You deposit money in a bank account, or invest it by buying a share of stock, and want to know what it might grow to.
			PV	N	R	PMT	TYPE	FV
Annual Compounding		Type: Beginning of Period	$ (1,000.00)	3.0	5.00%	$ - 0	1	$1,157.63
		Type: End of Period	$ (1,000.00)	3.0	5.00%	$ - 0	0	$1,157.63
Monthly Compounding		Type: Beginning of Period	$ (1,000.00)	36	0.4167%	$ - 0	1	$1,161.47
		Type: End of Period	$ (1,000.00)	36	0.4167%	$ - 0	0	$1,161.47
TO CALCULATE THE PRESENT VALUE OF FUTURE AMOUNT								Formula: PV = FV / (1 + R)^N
Example: How much should you put aside today to have a specified amount in the future, assuming N periods and R rate of return?
			PV	N	R	PMT	TYPE	FV
Annual Discounting		Type: Beginning of Period	$ (500.16)	14.2	5.00%	$ - 0	1	$1,000.00
		Type: End of Period	$ (500.16)	14.2	5.00%	$ - 0	0	$1,000.00
Monthly Discounting		Type: Beginning of Period	$ (492.37)	170.4	0.4167%	$ - 0	1	$1,000.00
		Type: End of Period	$ (492.37)	170.4	0.4167%	$ - 0	0	$1,000.00
TO CALCULATE THE NUMBER OF PERIODS
Example: How long will it take to double your money?
			PV	N	R	PMT	TYPE	FV
Annual Compounding		Type: Beginning of Period	$ (1,000.00)	15.2	5.00%	$ - 0	1	$2,000.00
		Type: End of Period	$ (1,000.00)	14.2	5.00%	$ - 0	0	$2,000.00
Monthly Compounding		Type: Beginning of Period	$ (1,000.00)	167.7	0.4167%	$ - 0	1	$2,000.00
		Type: End of Period	$ (1,000.00)	166.7	0.4167%	$ - 0	0	$2,000.00
TO CALCULATE THE RATE OF RETURN
Example: What rate of return do I need to pay for my kids' college if I save $X each year?
			PV	N	R	PMT	TYPE	FV
Annual Compounding		Type: Beginning of Period	$ - 0	8.0	9.00%	$ (1,455.78)	1	$17,500.00
		Type: End of Period	$ - 0	8.0	11.37%	$ (1,455.78)	0	$17,500.00
Monthly Compounding		Type: Beginning of Period	$ - 0	96	0.7935%	$ (121.32)	1	$17,500.00
		Type: End of Period	$ - 0	96	0.8084%	$ (121.32)	0	$17,500.00
TO CALCULATE PERIODIC LOAN OR SAVINGS PAYMENTS
Example: What will my car loan payments be?
			PV	N	R	PMT	TYPE	FV
Annual Compounding		Type: Beginning of Period	$ - 0	8.0	9.00%	($1,455.78)	1	$17,500.00
		Type: End of Period	$ - 0	8.0	9.00%	$ (1,586.80)	0	$17,500.00
Monthly Compounding		Type: Beginning of Period	$ - 0	96	0.7500%	$ (124.20)	1	$17,500.00
		Type: End of Period	$ - 0	96	0.7500%	$ (125.13)	0	$17,500.00
					NOTE: TOTAL PAYMENTS		OF THE GRAND TOTAL PMTS
	OF THE PERIODIC PAYMENTS ABOVE:				PER YEAR	GRAND TOTAL	PRINCIPAL	INTEREST
	Annual Compounding		Type: Beginning of Period		$ (1,455.78)	($11,646.25)	$ - 0	($11,646.25)
			Type: End of Period		$ (1,586.80)	$ (12,694.41)	$ - 0	$ (12,694.41)
	Monthly Compounding		Type: Beginning of Period		$ (1,490.36)	$ (11,922.92)	$ - 0	$ (11,922.92)
			Type: End of Period		$ (1,501.54)	$ (12,012.34)	$ - 0	$ (12,012.34)
TO CALCULATE NET PRESENT VALUE (NPV)
Example: What is the value today of a series of future cash flows?											NOTE: Extend timeline for however many periods you need -->
		Timeline Periods -->	0	1	2	3	4	5	6	7	8	TOTAL
COSTS (Negative)		Initial Investment, if any	$ (5,000)	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ -	$ (5,000)
		Regular operating costs		(100)	(100)	(100)	(100)	(100)	(100)	(100)	(100)	(800)
		Ending shutdown or cleanup costs		-	-	-	-	-	-	-	-	-
		Opportunity cost		(25)	(25)	(25)	(25)	(25)	(25)	(25)	(25)	(200)
		Cannibalization (if any)		(10)	(12)	(15)	(15)	(15)	(15)	(15)	(15)	(112)
		Other costs (excl sunk costs)		-	-	-	-	-	-	-	-	-
BENEFITS (Positive)		New sales revenue		50	300	500	600	600	600	600	700	3,950
		Add'l sales of existing stuff		-	-	-	-	-	-	-	-	-
		Cost savings		5	10	10	10	10	10	10	10	75
		Other incremental benefits		-	-	-	-	-	-	-	-	-
TOTAL		NET CASH FLOW	$ (5,000)	$ (80)	$ 173	$ 370	$ 470	$ 470	$ 470	$ 470	$ 570	-2087
For R=	10.00%	NPV	($2,970)
	Note: "R" should be the risk-adjusted required rate of return for an investment of this estimated level of risk. It is usually between 3.0% and 20%.
Note: Projections of future cash flows are almost always highly uncertain. Consider different scenarios, such as most likely, best case, and worst case.

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Sheet1

Month ->	1	2	3	4	5	6	7	8	9	10	11	12
Interest Rate	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%	0.8333%
Start of Month	$1,000.00	$1,008.33	$1,016.74	$1,025.21	$1,033.75	$1,042.37	$1,051.05	$1,059.81	$1,068.64	$1,077.55	$1,086.53	$1,095.58
Interest Charge	$8.33	$8.40	$8.47	$8.54	$8.61	$8.69	$8.76	$8.83	$8.91	$8.98	$9.05	$9.13
End of Month	$1,008.33	$1,016.74	$1,025.21	$1,033.75	$1,042.37	$1,051.05	$1,059.81	$1,068.64	$1,077.55	$1,086.53	$1,095.58	$1,104.71

Help-Depreciation

DOES DEPRECIATION EXPENSE AFFECT CASH FLOW?
SITUATION
-	Suppose you have a really simple business: you've bought a new 3-D printer, and you rent it out to fellow SNHU students for $4000/yr.
-	The students who rent the printer are responsible for supplies and maintenance.
-	You estimate the printer's useful life is 3 years, and at the end of that time you can sell it for $500.
-	Accounting rules require you to "recognize" the printer's cost by spreading it over the estimated useful life.
			YEAR 1	YEAR 2	YEAR 3	CUMULATIVE
1.	You buy the printer for cash, & sell it 3 yrs later.	Investment	$ (10,000)	$ - 0	$ 500	$ (9,500)
2.	You rent it to other students for $4,000 / year	Revenue	$ 4,000	$ 4,000	$ 4,000	$ 12,000
3.	You record depreciation expense for the printer	Expense	$ (3,167)	$ (3,167)	$ (3,167)	$ (9,500)
Notice the "Cumulative" column: Cumulative depreciation equals cumulative cash flow. Depreciation is simply a spreading out of the cash flow.
IN A REALLY SIMPLE WORLD, YOUR FINANCIALS MIGHT LOOK LIKE THIS:
	REVENUE		$ 4,000	$ 4,000	$ 4,000	$ 12,000
	Buying and Selling of 3-D Printer		$ (10,000)	$ - 0	$ 500	$ (9,500)
	PRETAX PROFIT OR (LOSS), EQUALS PRETAX CASH FLOW		$ (6,000)	$ 4,000	$ 4,500	$ 2,500
	Tax Refunds or (Payments), @ 40% Tax Rate		$ 2,400	$ (1,600)	$ (1,800)	$ (1,000)
	NET PROFIT OR (LOSS), EQUALS NET CASH FLOW		$ (3,600)	$ 2,400	$ 2,700	$ 1,500
	Notice that the net profit line is rather lumpy.
BUT YOUR ACCOUNTING INCOME STATEMENTS WILL LOOK LIKE THIS:
	REVENUE		$ 4,000	$ 4,000	$ 4,000	$ 12,000
	Depreciation Expense		$ (3,167)	$ (3,167)	$ (3,167)	$ (9,500)
	OPERATING PROFIT OR (LOSS)		$ 833	$ 833	$ 833	$ 2,500
	Tax Provision Expense @40% Tax Rate		$ (333)	$ (333)	$ (333)	$ (1,000)
	NET PROFIT (OR LOSS)		$ 500	$ 500	$ 500	$ 1,500
	Notice that the net profit line above is smooth, but the Cumulative column hasn't changed.
AND YOUR CASH FLOW STATEMENTS (STANDARD FORMAT) WILL LOOK LIKE THIS:
	Net Profit (Or Loss) from Above		$ 500	$ 500	$ 500	$ 1,500
	Add back: Depreciation Expense		$ 3,167	$ 3,167	$ 3,167	$ 9,500
	Change in Working Capital & Other Operating Activities		$ - 0	$ - 0	$ - 0	$ - 0
	Cash Flow From Operating Activities		$ 3,667	$ 3,667	$ 3,667	$ 11,000
	Capital Expenditures		$ (10,000)	$ - 0	$ - 0	$ (10,000)
	Proceeds from Sale of Assets		$ - 0	$ - 0	$ 500	$ 500
	Cash Flow from Investing Activities		$ (10,000)	$ - 0	$ 500	$ (9,500)
	Additional Paid-in Capital		$ - 0	$ - 0	$ - 0	$ - 0
	Dividends Paid		$ - 0	$ - 0	$ - 0	$ - 0
	Cash Flow from Financing Activities		$ - 0	$ - 0	$ - 0	$ - 0
	NET CASH FLOW		$ (6,333)	$ 3,667	$ 4,167	$ 1,500
	Cash Balance at Beginning Of Year		$ 10,000	$ 3,667	$ 7,333
	Cash Balance at End of Year		$ 3,667	$ 7,333	$ 11,500