DOLLAR TREE, INC.
SALONI BAID,
ANGELA CIPOLA,EZRA KASSIN,
Stephany Carvajal
HISTORY
Sector:
Retail, Consumer
Goods, Services
Industry:
Discount.Variety
stores
Full Time Employees:
17,600
Dollar Tree, Inc. operates discount variety stores in
the United States and Canada.
Sells Variety of products

Toys, food, gifts, greeting cards etc.
Dollar Tree’s Business model:

Everything $1 or less!
Founded in 1986
Based in Chesapeake, Virginia.
History
 Initial Public Offering in March of 1995 at $15 a
share.
 Dollar Tree acquired many companies throughout
the years.
 By 2012, operated approximately 5,080 stores and
exceeded $7 billion in sales.
 Recently, the company is in talks to buy out Family
Dollar
WHY DOLLAR TREE
 To analyze the factors that contributed to the firm’s
success
 Leading company that targets customers due to their
low cost distribution
 Acquired and opened thousands of stores in the past
few years
 Competitors are Family Dollar, 99 cents store, etc.
Dollar Tree Today
Balance Sheet
Profitability
Financial Strength
Dollar Tree Ratios (2012-2014)
Dollar Tree Vs. Comps
Dollar tree vs. Industry Average
Company
Industry
2
1.19
0.51
0.51
Total Debt Ratio
57.76
53.61
Long Term Debt Ratio
27.3
37.4
Interest Coverage (TIE)
62.96
105.09
7.58
7.66
Profit Margin
7.61
4.23
ROA
21.52
8.23
ROE
47.62
17.61
23.42
37.28
Short term Solvency:
Current Ratio
Quick Ratio
Long Term Solvency
Asset management Measures
Inventory Turnover
Profitibility Measures
Marekt Value Measures
P/E
CAPITAL STRUCTURE:
DEBT & EQUITY
 Debt VS Equity


2014 Debt-Equity Ratio = 0.66
2014 Total Debt Ratio = 57.76%
Sustainable Growth Rate
 SGR= [ROE x Retention Ratio]/[1 - (ROE x Retention
Ratio)]
 SGR for 2014= [.509695054 x 1]/[1 – (.509695054 x
1)] = 1.039547037 x 100 = 103.95%
 SGR for 2013= [.37143853 x 1]/[1 – (.37143853 x 1)] =
.5909342964 x 100 = 59.09%
 SGR for 2012= [.363156329 x 1]/[1 – (.363156329 x 1)]
= .5702440733 x 100 = 57.02%
Internal Growth Rate
 IGR= [ROA x Retention Rate]/[1-(ROA x Retention
Ratio)]
 IGR for 2014= [.215267506 x 1]/[1 – (.215267506 x 1)] =
.274319602726 x 100 = 27.43%
 IGR for 2013= [.225036337 x 1]/[1 – (.225036337 x 1)]
= .290383082129 x 100 = 29.04%
 IGR for 2012= [.209696814 x 1]/[1 – (.209696814 x 1)]
= .26533717403 x 100 = 26.53%
Decomposing ROE using DuPont Identity
 ROE=Net Income Sales × Sales Assets × Assets Total
Equity
 ROE for 2014= (596,700/7, 840,300) × (7,840,300/1, 035,300) ×
(1,035,300/1, 170,700) =0.5097
 ROE for 2013= (619,300/7, 394,500) × (7,394,500/971700) × (971700/1,
667,300) =0.3714
 ROE for 2012= (488,300/6, 630,500) × (6,630,500/867, 400) × (867,400/1,
344,600) =0.3632
Comparison
ROE= Profit Margin x Total Asset Turnover x Equity Multiplier
Years
ROE
Profit Margin
Total Asset
Turnover
Equity
Multiplier
2014
0.5097
7.61%
7.5730
88.43%
2013
0.3714
8.38%
7.6099
58.28%
2012
0.3631
7.36%
7.6441
64.51%
COST OF DEBT
Using a competitor to determine cost of debt: Dollar General
 Dollar Gen Corp New 3.25% | Maturity:10
YTM = 4.45%
After Tax Cost = 2.77%
Corp Tax Rate= 37.8
DLTR Vs S&P 500
CAPM Calculation
Treasury Rates
10 Year
0.02275
15 Year
0.0259
20 Year
0.0269
Beta
Yahoo Finance
Nasdaq.com
Morningstar.com
0.7
0.87
0.76
In order to calculate WACC, we need to calculate
The Cost of Equity (rE) using Capital Asset Pricing
Model (CAPM)
CAPM
CAPM= (.7+.03)*(.11-.03)= 8.6%
Weighted Average Cost of Capital
 The weighted average cost of capital (WACC) is the
rate of return that a company is expected to pay to
all its security holders to finance its assets.
WACC= (D/V) Rd (1-Tc) + (E/V) Re
WACC = (520,550,000/14,580,550,000) (.0296) (1
- .3717) + (14,060,000,000/14,580,550,000)
(.086)
WACC = 8.36%