Discounted Cash Flow Analysis Dcf Valuation Model Template

Slide 1: Discounted Cashflow Model Get the MS Excel template at www.gazhoo.com EXHIBIT #1 - Ratio Analysis INPUTS 2005 2006 2007 INPUTS BALANCE SHEET Cash 3,877,174 3,544,671 6,081,593 Accounts Receivable 737,317 1,352,053 2,376,312 Inventory 0 0 - Total Current 9,001,071 13,039,847 17,289,138 Total ASSETS 10,271,813 18,473,351 25,335,806 Accounts Payable 672,285 1,199,451 1,857,529 Total Current 745,384 1,304,587 2,035,602 Total LIABILITIES 852,856 1,433,511 2,646,127 Total EQUITY 9,418,957 17,039,840 22,689,679 INCOME STATEMENT Sales 6,138,560 10,604,917 16,593,986 Purchases 0 0 - COGS 3,561,472 6,379,890 9,944,901 Expenses 4800000 1,500,000 Interest 776 257 1,203 Tax 676,280 933,594 1,470,260 NPAT (Net Income) 1,465,397 3,077,446 4,203,720 stock price 415 460.48 433 BV per share 57 70 72.51 Performance/Profitability 2005 2006 2007 ROE =NPAT/equity 16% 18% 19% Gross Margin percent =GP/sales 42% 40% 40% Return on Assets =NIAT/TA 14% 17% 17% Sales Growth 73% 56% Efficiency Age of Inventory =inv/(COGS/365) 0.00 0.00 0.00 Age of Receivables =AR/(sales/365) 43.84 46.53 52.27 Age of Payables =AP/(purchases/365) #DIV/0! #DIV/0! #DIV/0! Liquidity Current ratio =CA/CL 12.08 10.00 8.49 Leverage Debt to Equity =total debt/equity 9% 8% 12% int. X coverage =EBIT/intX 1,889.40 14,606.94 4,271.42

Slide 2: Price to earnings =stock price/BV per share 7.27824561 6.57828571 5.971590125

Slide 3: EXHIBIT #2 - BETA Get the MS Excel template at www.gazhoo.com Levering and Unlevering Comparable Betas Comparable Firm 1 Comparable Firm 2 Comparable Firm 3 Unlevering Unlevering Unlevering Original beta 1.1 Original beta 1.1 Original beta 1.1 Tax rate 43% Tax rate 43% Tax rate 43% Debt share 20.08% Debt share 20.08% Debt share 20.08% Equity share 79.92% Equity share 79.92% Equity share 79.92% Debt/equity 25.12% Debt/equity 25.12% Debt/equity 25.12% =>unlevered beta 0.962 =>unlevered beta 0.962 =>unlevered beta 0.962 Formula: BU = BL/(1+(1-t)*(D/E)) Relevering for our optimal capital structure Unlevered beta (avg) 0.962 Tax rate 43% New debt share 20.08% Target Wd - used current capital structure, refer to WACC New equity share 79.92% Target We - used current capital structure, refer to WACC New debt/equity 25.12% => relevered beta 1.100 Formula: BL= BU*(1+(1-t)*(D/E)) Initial Beta 1.1 Tax Rate 42.80% Initial Weight of Debt - We 79.92% Initial Weight of Debt - Wd 20.08%

Slide 4: WACC calculation Calculating The We and Wd of Target Company Number Explanation LT interest bearing Debt (BV) $360,906 Other debt $0.00 Market value of equity Shares outstanding 37,000 Current market price Share Capital $1,436,704 Weight of Equity - We 79.92% Weight of Debt - Wd 20.08% Input values Number Explanation Bond rating 0.065 AA rating Risk Free Rate Of Return 9.10% match with the length of the project Risk Free Rate Of Return - LT, used for MP 9.10% 30 yr. Bond Expected Rate Of Return on the Market 2.10% MP = Rm - Rf 7.00% Market premium = Rf - Returns on Beta of Target Company 1.10 Risk Premium 0.50% Tax Rate 42.80% Risk Free Rate of Return 9.10% MP = Rm - Rf 7.00% Beta 1.10 Ke 16.80% CAPM = Rf + beta(MP) Interest rate 6.50% Assumption AA rating Risk Premium 0.50% Tax Rate 43% Kd 4.00% = (Rf + risk premium) * (1 - t) Weight of Equity - We 80% from optimal capital structure, above Weight of Debt - Wd 20% from optimal capital structure, above WACC 14.23% EXHIBIT #3 - WACC sensitivity Get the MS Excel template at www.gazhoo.com Sensitivity analysis Weight of equity (includes impact on new beta) 14.23% 60.0% 70.0% 80% 90.0% 100.0% 7.10% 10.36% 11.42% 12.48% 13.54% 14.60% Rf rate of return 8.10% 11.02% 12.19% 13.36% 14.53% 15.70% (matched with 9.10% 11.68% 12.96% 14.24% 15.52% 16.80%

Slide 5: length of project) 10.10% 12.34% 13.73% 15.12% 16.51% 17.90% 11.10% 13.00% 14.50% 16.00% 17.50% 19.00% Risk free debt rate (dependent on bond rating) 14.23% 4.5% 5.5% 6.5% 7.5% 8.5% 7.10% 12.40% 12.52% 12.63% 12.75% 12.86% Rf rate of return 8.10% 13.20% 13.32% 13.43% 13.55% 13.66% (matched with 9.10% 14.00% 14.12% 14.23% 14.35% 14.46% length of project) 10.10% 14.80% 14.92% 15.03% 15.15% 15.26% 11.10% 15.60% 15.71% 15.83% 15.94% 16.06% Summary used 14.23% Min 10.36% Max 19.00% Avg 14.24%

Slide 6: EXHIBIT #4 - DISCOUNTED CASH FLOW VALUATION Inputs Get the MS Excel template at www.gazhoo.com Number Explanation WACC 14.23% Calculated on WACC sheet Tax Rate 42.80% Growth Rate of Terminal Value 5% assumption, refer to sensitivity Number of Shares Outstanding 37,000 Revenue Growth 7.20% Given Expenses (interest included) 93.20% of sales Interest 1.00% of sales Working Cap (% of sales) 16.00% Depreciation 1.80% of sales Year 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 Years For FCF 1 2 3 4 5 6 7 8 9 10 Years For Terminal Revenue Net Revenue $3,582,005 $3,839,909 $4,116,383 $4,412,762 $4,730,481 $5,071,076 $5,436,193 $5,827,599 $6,247,186 $6,696,984 Expenses Total Expenses $3,338,429 $3,578,796 $3,836,469 $4,112,695 $4,408,809 $4,726,243 $5,066,532 $5,431,323 $5,822,378 $6,241,589 add back Interest Expense $3,338,429 $3,578,796 $3,836,469 $4,112,695 $4,408,809 $4,726,243 $5,066,532 $5,431,323 $5,822,378 $6,241,589 EBIT $243,576 $261,114 $279,914 $300,068 $321,673 $344,833 $369,661 $396,277 $424,809 $455,395 Tax Rate 42.80% 42.80% 42.80% 42.80% 42.80% 42.80% 42.80% 42.80% 42.80% 42.80% EBIT*(1-tax rate) $139,326 $149,357 $160,111 $171,639 $183,997 $197,245 $211,446 $226,670 $242,991 $260,486 add back : Depl, Depr, Amort $64,476 $69,118 $74,095 $79,430 $85,149 $91,279 $97,851 $104,897 $112,449 $120,546 less : Capital Ex $64,476 $69,118 $74,095 $79,430 $85,149 $91,279 $97,851 $104,897 $112,449 $120,546 less : Change in W/C $0 $41,265 $44,236 $47,421 $50,835 $54,495 $58,419 $62,625 $67,134 $71,968 Free Cash Flows $139,326 $108,092 $115,875 $124,218 $133,162 $142,749 $153,027 $164,045 $175,857 $188,518 Present Value $121,968 $82,838 $77,739 $72,954 $68,464 $64,250 $60,295 $56,584 $53,101 $49,833 Number Explanation Net Present Value of FCF $708,026 Terminal Value (Perpetuity) $5,180,017 = FCF terminal yr * (1 + g) / (WACC - g) PV of Terminal Value $1,369,283 Enterprise Value (EV) $2,077,309 = NPVFCF + PVTV less: Value of Net Debt $360,906 Net Debt = Total debt less cash and Mkt. Sec. less: Preferred Shares $0 Value of equity $1,716,403 Number of Shares Outstanding 37,000 Price Per Share $46.39

Slide 7: EXHIBIT #5 - SENSITIVITY Per share sensitivity WACC $46.39 12% 13% 14% 15% 16% 7% $96.12 $75.07 $60.32 $49.47 $41.21 Terminal Growth 6% $81.32 $65.32 $53.56 $44.61 $37.62 Rate 5% $70.75 $58.00 $48.30 $40.72 $34.67 4% $62.83 $52.31 $44.10 $37.54 $32.22 3% $56.66 $47.76 $40.66 $34.89 $30.15 Share price sensitivity WACC $120.00 $100.00 12% $80.00 13% $60.00 14% 15% $40.00 Value per share 16% $20.00 $0.00 7% 6% 5% 4% 3% Terminal Growth Rate Per share sensitivity WACC $46.39 12% 13% 14% 15% 16% 9% $81.27 $66.36 $55.06 $46.25 $39.23 Sales Growth 8% $75.83 $62.03 $51.56 $43.39 $36.87 Rate 7% $70.75 $58.00 $48.30 $40.72 $34.67 6% $66.03 $54.24 $45.26 $38.24 $32.62 5% $61.64 $50.74 $42.44 $35.92 $30.71 Per share sensitivity Share price sensitivity WACC $90.00 $80.00 12% $70.00 $60.00 13% $50.00 14% $40.00 $30.00 15% Share price $20.00 16% $10.00 $0.00 9% 8% 7% 6% 5% Sales Growth