Homework #3
Use the Company’s 2009 financial statements below, to calculate the Debt Capacity of
the Company by both Collateral and Cash Flow Analysis methods:
Balance Sheet (000's)
Current Assets
Cash
Accounts Receivable
Inventories
Prepaid Expenses
Total Current Assets
Property and Equipment
Land
Building
Furniture & Equipment
Total Gross P&E
Less Accumulated Depreciaition
Net P&E
Long-Term Investments
Total Assets
2009
65,800
60,000
40,000
9,000
174,800
2,500,000
550,000
75,000
3,125,000
(365,000)
2,760,000
250,000
3,184,800
Liabilities and Owners Equity
Current Liabilities
Accounts Payable
Accrued Income Taxes
Accrued Expenses
Current Portion of Long Term Debt
Total Current Liabilities
Long-Term Debt:
Deferred Income Taxes
Total Liabilties
40,000
10,000
8,000
10,000
68,000
1,180,000
17,000
1,265,000
Income Statement (000's)
2009
Revenues by Geography
U.S.
Europe
Asia
Total Revenue
920,000
140,000
50,000
1,110,000
Cost of Revenues by Geography
U.S.
Europe
Asia
Total Cost of Revenue
270,000
115,000
35,000
420,000
Gross Profit
690,000
Operating Expenses
Administrative & General
Marketing Expenses
Other Operating Expenses
Total Operating Expenses
165,000
80,000
12,000
257,000
EBITDA
433,000
65,000
Depreciation
EBIT
368,000
Interest Expense
120,000
248,000
EBT
Taxes
40%
Net Income
Owners' Equity
Common Stock
Paid-in-Capital
Retained Earnings
Total Owners' Equity
1,000,000
25,000
894,800
1,919,800
Total Liabilities & Owner's Equity
3,184,800
Cash Flow Statement (000's)
99,200
148,800
2009
Net Income
Plus Depreciation
Plus Deffered Taxes
Cash Income
148,800
65,000
5,000
218,800
Working Capital Activities
Change in Accounts Receivable
Change in Inventory
Change in Prepaid Expenses
Change in Accounts Payable
Change in Accrued Income Taxes
Change in Accrued Expenses
Total Change in Working Capital
(15,000)
(5,000)
1,000
5,000
(2,000)
(2,000)
(18,000)
Operating Cash Flow (OCF)
200,800
Investment Activities
Capital Expenditures
Investments (Change)
Total Financing Activities
Cash Available Before Financing Activities
Financing Activities
ST Debt Payments
LT Payments
Equity Contribution
Total Financing Activities
Free Cash Flow
(125,000)
(50,000)
(175,000)
25,800
(10,000)
(20,000)
25,000
(5,000)
20,800
1. Assumptions for the Collateral Analysis - HINT: use the excel sheet from the
website (www.celeritymoment.com ) called Debt Capacity Analysis to calculate
the Debt Capacity
Cash
A/R
Inventory
Fixed Assets
Investments
Advance
Rates
(ABL
Facility)
100%
85%
50%
50%
50%
BV of
Assets
($ mm)
Debt
Capacity
based on
Colateral
Total
= Debt Capacity
2. Assumptions Cash Flow Analysis (2009 – 2013) – HINT: use the excel sheet
from the website (www.celeritymoment.com ) called Debt Capacity Analysis to
calculate the Debt Capacity
Revenue growth use 5.0%
Cost of Goods Sold as % of Revenues – the same as 2009
Operating Expense as % of Revenue – the same as 2009
Capital Expenditure as % of Revenue – the same as 2009
Tax Rate 40%
Working Capital = $0 (2009-2013)
Terminal Value EBITDA multiple = 6.0x
PV Cushion = 20%
Interest Rate = 10%