131203 financial modelling - excel

data2impact the data automation experts

Financial Modelling and

DCF Valuation

Leipzig, December 3rd, 2013

data2impact – the data automation experts 1

Trainer introduction – Peter Albert

▪ Head of data2impact Dresden office

▪ Founder and former CEO of data2impact Scandinavia

▪ K12/13 alumnus

▪ Former Engagement Manager with McKinsey & Company, Zurich

▪ Project Manager and Developer with Intershop AG, Jena

Vita

▪ Evaluation models for Equities Research department of a global investment bank

▪ Online tool to create healthcare scorecard for countries

▪ Simulation of impact from pricing change for a medical company

▪ Daily performance management tool for fleet management of a national parcel services

▪ Weekly project reporting for a national ministry of roads and traffic

Recent

projects

▪ www.data2impact.com

▪ [email protected]

▪ +49 (0) 151 6730 1525

Contact

details

▪ SQL Server

▪ ASP.NET MVC/C#

Techno-

logies

▪ Excel

▪ PowerPivot

▪ Access

▪ Visual Basic

▪ PowerPoint

▪ thinkcell


Content

▪ Modelling basics

▪ Profit & Loss

▪ Net Working Capital

▪ Depreciation & Capex

▪ Pensions

▪ Debt financing

▪ Discounted Cashflow and Terminal Value

▪ Sensitivities

▪ Sanity checks


What is a model?

Oxford Dictionary:

"A simplified description, especially a

mathematical one, of a system or process, to

assist calculations and predictions"

X X Profit & Loss statement

(in M€) Previous periods Current Projection CAGR

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 09-12 13-19

Sales 619 620 598 620 633 652 684 719 747 770 789 0,1% 3,7%

COGS (449) (444) (440) (454) (477) (491) (515) (541) (563) (580) (594) 0,4% 3,7%

Gross profit 171 176 158 167 156 161 169 178 185 190 195 -0,8% 3,7%

SG&A (43) (42) (49) (38) (40) (41) (43) (45) (47) (48) (50) -3,6% 3,7%

Rent (14) (14) (14) (18) (22) (23) (24) (25) (26) (27) (28) 8,5% 3,7%

Other expenses (6) (6) (5) (8) (6) (7) (7) (7) (7) (8) (8) 7,4% 3,7%

EBITDA 107 114 91 102 88 91 95 100 104 107 110 -1,6% 3,7%

Depreciation (38,6) (38,6) (41,7) (51,0) (53) (59) (66) (73) (81) (88) (96) 9,8% 10,6%

Amortization - - - - - - - - - - - - -

EBIT 69 75 49 51 35 31 29 27 23 19 13 -9,4% -15,0%

Interest expenses (20) (20) (21) (22) (17) (11) (10) (8) (7) (5) (4) 2,1% -22,2%

Pension interest expenses - - - - - - - - - - - -

Interest income 1 1 0 1 0 0 0 0 0 0 0 -20,6% 3,5%

Financing costs (1) (1) (1) (1) (2) - - - - - - -0,3% -100,0%

PBT 48 55 27 29 16 20 20 19 17 14 10 -15,9% -8,2%

Tax (14) (15) (7) (8) (5) (6) (5) (5) (5) (4) (3) -15,9% -8,2%

Net income 35 39 19 21 12 15 14 13 12 10 7 -15,9% -8,2%

Dividend - - - (52) (8) (10) (10) (9) (8) (7) (5)

© data2impact

data2impact Financial Modelling 3

- TRAINING MODEL (12/07/13) - C:\Users\Peter\Documents\d2i\Training\Finance\New training\Exercises\[Full model.xlsb]M odel

Balance Sheet


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 09-12 13-19

Cash, petty cash, temporary investments 24 69 86 56 84 72 63 59 61 68 81 31,8% -0,5%

Accounts receivable 51 51 48 48 43 45 47 49 51 53 54 -2,2% 3,7%

Inventory 38 39 37 32 33 34 35 37 39 40 41 -5,6% 3,7%

Other current assets 5 5 4 10 6 7 7 7 7 8 8 25,5% 3,7%

Current assets 119 164 174 146 166 157 152 153 158 168 184 7,0% 1,7%

Properties, plant & equipment 326 320 328 325 316 303 285 262 233 199 157 -0,1% -11,0%

Intangible assets 1 1 1 1 1 1 1 1 1 1 1 - -

Non-current assets 327 322 329 326 318 304 286 263 234 200 159 -0,1% -10,9%

Assets 446 486 503 472 484 461 438 416 393 368 343 1,9% -5,6%

Accounts payable 48 48 46 44 46 47 49 52 54 56 57 -3,1% 3,7%

Other current liabilities - - - - - - - - - - - - -

Current liabilities 48 48 46 44 46 47 49 52 54 56 57 -3,1% 3,7%

Pension liabilities 40 40 41 43 44 44 45 45 46 47 47 2,6% 1,3%

Existing debt tranche 230 230 230 230 - - - - - - - - -

Term loan - - - - 236 207 177 148 118 89 59 - -20,6%

Liabilities 318 319 317 317 326 298 271 245 218 191 163 -0,1% -10,9%

Paid in capital 1 1 1 1 1 1 1 1 1 1 1 - -

Net income 35 39 19 21 12 15 14 13 12 10 7 -15,9% -8,2%

Dividends - - - (52) (8) (10) (10) (9) (8) (7) (5) - -8,2%

Retained earnings 91 126 166 185 153 157 161 166 170 173 176 26,4% 2,3%

Equities 127 167 186 155 158 163 167 171 175 177 180 6,7% 2,1%

Liabilities & equity 446 486 503 472 484 461 438 416 393 368 343 1,9% -5,6%

Balance check

data2impact – the data automation experts

Spreadsheet development & usage can be divided up into 3 stages

4

Preparation & Structure Building &

Formatting Analysis

▪ Planning

▪ Structure

▪ Assumptions

▪ Best practice

guidelines

–Sources

–Naming

–Units

–Format

▪ Sanity checking

▪ Documentation

Stages of spreadsheet model development & usage


Plan the structure and analytical approach of the spreadsheet modle

before building it

5

▪ Do not switch on the machine!

▪ Agree model’s requirements with team

▪ Decide what type of model you are building

▪ Plan the analytical approach using

–Schematic diagrams

–Back of envelope calculations

▪ Decide model structure, paying special

attention to separating assumptions from inputs

and outputs

▪ Choose the right tool


Formatting Analysis


Find out as much as possible about the purpose and requirements of

the model before you start

6

Questions to ask before you start

▪ General

– What is the purpose of the model?

– How will the results be validated/syndicated?

– What software and which version?

▪ Data

– What data will be required?

– What are the data sources?

– What proxies/samples could be used if there is a

delay?

– Which data is likely to change?

▪ Calculations

– What calculations will be required?

– Will scenarios be needed and if so, which?

– What kind of back-of-the-envelope calculations

could be used?

▪ Outputs

– What outputs should the model produce?

– What stakeholders will use the model?

– What format should the outputs be in?

?


Structure of a model

Assumptions

Start year 2013 Operating assumptions

Financial assumptions Capex/depreciation

Capex (% of sales) 7,0%

Corporate tax 28,0% Useful life (years) 7

Dividends payout ratio 70,0%

2013 2014 2015 2016 2017 2018 2019

DCF assumptions Working capital

Accounts receivable (in d) 25 25 25 25 25 25 25

Debt Inventory (in d) 25 25 25 25 25 25 25

Target capital structure - debt/market value40,0% Other current assets 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% (% of sales)

Debt spread (at 0% debt ratio) 0,5% Accounts payable 35 35 35 35 35 35 35

Abs. increase per 10%pt debt ratio 0,4% Other current liabilities - - - - - - - (% of COGS)

Levered debt premium 1,9%

WACC Growth assumptions

Tax rate 30,0% Sales 2,0% 3,0% 5,0% 5,0% 4,0% 3,0% 2,5%

Risk free rate 3,0%

Market risk premium 5,0% Costs as % of Sales

Resulting WACC 7,8% COGS 75,3% 75,3% 75,3% 75,3% 75,3% 75,3% 75,3%

SG&A 6,3% 6,3% 6,3% 6,3% 6,3% 6,3% 6,3%

Perpetual growth 2,2% Rent 3,5% 3,5% 3,5% 3,5% 3,5% 3,5% 3,5%

EBITDA exit multiple 8,0x Other expenses 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0%

Start year cash flow share 50%

Pensions

Refinancing of existing debt Service costs (0,6) (0,6) (0,6) (0,6) (0,6) (0,6) (0,6)

Interest costs - - - - - - -

Year of refinancing 2013

Tenor (in years) 8 Net debt adjustment

Amortization offset (in years) 1 Pension liability PV multiple 1,35x

Loan amount (in M€) 230 Operating lease multiple 17,50x

Interest rate 5,0%

Financing fee 1,0% Sensitivity support

Perpetual growth 2,2%

Interest rate cash account 0,3% EBITDA exit multiple 8,0x

Target capital structure - debt/market value 40,0%

Capex (% of sales) 7,0%

Sensitivity analysis (using EBITDA exit multiple method)

Enterprise value sensitivity to perpetuity growth rate and WACC Enterprise value sensitivity to debt ratio and WACC

(in M€) EBITDA exit multiple (in M€) EBITDA exit multiple

1.038 6,0x 7,0x 8,0x 9,0x 10,0x 1.038 6,0x 7,0x 8,0x 9,0x 10,0x

6,8% 900 995 1.089 1.183 1.278 20,0% 855 943 1.032 1.121 1.209

7,3% 880 971 1.063 1.155 1.247 30,0% 858 947 1.036 1.125 1.215

7,8% 860 949 1.038 1.128 1.217 40,0% 860 949 1.038 1.128 1.217

8,3% 840 927 1.014 1.101 1.188 50,0% 859 949 1.038 1.127 1.217

8,8% 822 906 991 1.075 1.160 60,0% 857 946 1.035 1.124 1.213

Enterprise value sensitivity to WACC and debt ratio Enterprise value sensitivity to WACC and debt ratio

WA

CC

De

bt

rati

o

-

200

400

600

800

1.000

1.200

1.400

Base case WACC (+/-1,0%) EBITDA exitmultiple (+/-

2,0x)

Debt ratio (+/-20,0%)

-

200

400

600

800

1.000

1.200

1.400

6,0x 7,0x 8,0x (basecase)

9,0x 10,0x

Profit & Loss statement


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 09-12 13-19

Sales 619 620 598 620 633 652 684 719 747 770 789 0,1% 3,7%

COGS (449) (444) (440) (454) (477) (491) (515) (541) (563) (580) (594) 0,4% 3,7%

Gross profit 171 176 158 167 156 161 169 178 185 190 195 -0,8% 3,7%

SG&A (43) (42) (49) (38) (40) (41) (43) (45) (47) (48) (50) -3,6% 3,7%

Rent (14) (14) (14) (18) (22) (23) (24) (25) (26) (27) (28) 8,5% 3,7%

Other expenses (6) (6) (5) (8) (6) (7) (7) (7) (7) (8) (8) 7,4% 3,7%

EBITDA 107 114 91 102 88 91 95 100 104 107 110 -1,6% 3,7%

Depreciation (38,6) (38,6) (41,7) (51,0) (53) (59) (66) (73) (81) (88) (96) 9,8% 10,6%

Amortization - - - - - - - - - - - - -

EBIT 69 75 49 51 35 31 29 27 23 19 13 -9,4% -15,0%

Interest expenses (20) (20) (21) (22) (17) (11) (10) (8) (7) (5) (4) 2,1% -22,2%

Pension interest expenses - - - - - - - - - - - -

Interest income 1 1 0 1 0 0 0 0 0 0 0 -20,6% 3,5%

Financing costs (1) (1) (1) (1) (2) - - - - - - -0,3% -100,0%

PBT 48 55 27 29 16 20 20 19 17 14 10 -15,9% -8,2%

Tax (14) (15) (7) (8) (5) (6) (5) (5) (5) (4) (3) -15,9% -8,2%

Net income 35 39 19 21 12 15 14 13 12 10 7 -15,9% -8,2%

Dividend - - - (52) (8) (10) (10) (9) (8) (7) (5)

Input Calculation Output

▪ Growth rates

▪ Multiples

▪ Tax rate

▪ Etc.

▪ P&L, Balance sheet, Cash flow

▪ Working capital (NWC)

▪ Properties, plants & equipment

(PPE)

▪ Debt financing

▪ Etc.

▪ Summaries

▪ Sensitivities

▪ Output sheets for other models

▪ Charts/tables to be embedded in

presentations and reports


It is helpful to document the layout of the model

schematically, particularly for larger analysis

8

Inputs: Company data

P&L data – base year (1999)

Revenues

▪ Volume

▪ Price Costs

▪ Fixed

▪ Variable

Scenario 1

Company Current Forecast

A

B

C

D

–

–

–

–

–

–

–

–

Calculation: Economic profit Outputs: Economic profit tree

Economic profit

2001 and 2008

Economic

profit

EBIT

Cost of

capital

Fixed

costs

Margin

Volume

Contri-

bution

margin

Price

Variable

costs Scenario 1

Documentation

1. Assumptions

2. Format conventions

3. Explanation of variables

4. Explanation of complex

calculations

Scenario

Volume growth

Price growth

VC growth

FC growth

1

5%

5%

0%

10%

2

10%

5%

0%

10%

3

15%

5%

0%

10%

Years to

forecast

5 5 5

ILLUSTRATIVE

Example plan of a model


It is essential to separate assumptions, inputs, calculations, and

outputs

9

▪ Sheets contain mix of base data, pivot, and calculations

▪ Only one worksheet used for all sections of model

▪ Model moves in all directions

▪ Time series go both horizontally and vertically in same model

▪ Values are hard-coded in formulae

▪ The developer assumes model will

– Never be seen by anybody else

– Be improved after having finished

– Be irrelevant in a year’s time

– Never be looked at again

▪ Separate sections for input data, pivot, calculations, and outputs

▪ Separate sheet for each section of model

▪ Time series all go in one direction (usually horizontally)

▪ The developer assumes model will

– Never be worked on by the developer again

– Be pulled out in a year’s time for quick reference

– Be passed around the team, and to other teams

Bad practice Good practice

Example – schematic of bad model structure

Data Calculations

Example – schematic of good model structure

Input Scenarios

Documentation Calculations Output 1 Output 2


Description

+

-

10

Multi-worksheet vs. single worksheet models

Multi-worksheet model Single-worksheet model

▪ Every module (e.g. P&L, DCF

analysis) in individual worksheet

▪ All modules in same worksheet

below each other

▪ Allows for larger complexity

▪ Slightly easier to extend/modify

▪ Forces clear structure for each

module, ensures that each module

has the same layout (e.g. year in

the same column)

▪ Easier auditing using "Precedents"

and "Dependents" arrows

▪ Data tables can be based on

assumptions in other modules

▪ Precedents and dependents arrows

often point outside worksheet

▪ Data tables force to rearrange

assumptions into output (or require

"hack")

▪ Large, complex models are difficult

to "squeeze" into one worksheet

▪ Merging modules from different

versions (e.g. in team environment)

involves higher risk


Building of the model needs to be a systematic process

11

▪ Get into the habit of being disciplined about

–Indicating sources for every input

–Clear naming of fields, sheets, and

models

–Indicating the units in use

–Consistent, clear, and simple formatting

▪ Use the expertise within your company/

department/team for help and advice


Formatting Analysis


Sources and types of fields should be clearly labeled

▪ No sources

▪ Multiple sources listed in a laundry list rather than against each section of data

▪ Estimates not explained or indicated

▪ Difference between inputs and calculations not clear

▪ Reliance on Excel’s note function (as they require a special effort to view/print)

▪ Every number sourced visibly on the same sheet as it appears

▪ Estimates clearly indicated

▪ Calculations vs. raw data clearly indicated

▪ Complex formulae explained


Example – Working sheet showing P&L Example – Revenue Forecast for a Satellite operator

Source:

Team Analysis; Annual Report, Accounting system; Fred Cooper (BL)

12


The model’s filename and sheet headings should clearly explain its

purpose and structure

▪ Never keeping separate copies of old versions

▪ Filenames like ‘swaps3old.xls’

▪ Incorrect titles (e.g., out-of-date ones)

▪ Titles only used on output sheets

▪ Ranges and constants never named

▪ Year and scope unclear (e.g., ‘Battery market size’)

▪ Separate files for different versions/revisions of the model

▪ Filenames like ‘101013 Regulatory Model v0.xls’

▪ All sheets, and sections within sheets have clear title

▪ Titles which are the first thing the eye sees

▪ Constants, e.g., WACC, given defined names

▪ Year and scope clear (e.g., ‘U.K. consumer battery market size, 2007’)


Example – Input sheet for Financial swaps Example – Output sheet for Regulatory model

13


Units must be clear and consistent

▪ Not documented on the sheet

▪ Varying unnecessarily

▪ 5% shown as 0.05 (or even 0.1)

▪ Real or nominal growth not indicated

▪ Clearly documented, either

– Per section/sheet, or

– Against every number

▪ 5% shown as 5%

▪ Real or nominal is clearly indicated

▪ Consistent use of currencies and decimals


Example – Calculation sheet on gas field Production Example – Input sheet showing P&L account

14


Formatting should be simple and consistent

▪ Lots of formatting

▪ Using formatting to indicate structure – there are no conventions, and it may not print! Particular headaches:

– Multiple colors

– Italics

– Different font sizes

– Complicated borders

▪ No indication on printouts of dates, version numbers, etc.

▪ Wasting time on it – format will not fix a model

▪ Minimal use of formatting

▪ Formatting restricted to:

– Chart titles

– Column titles

– Subtotals and totals

– Inputs/drivers – often a different color

– Potentially: calculation and model structure

▪ Consistency

▪ Time/date/version/author stamp on all printouts


Example – Output sheet showing P&L and cashflow Example – The same P&L and cashflow

15


Best practice: Define and use styles

Description:

▪ Instead of formatting each cell individually, define styles up front – and apply them rigorously!

▪ Each cell can only have one style, i.e. styles cannot be combined

▪ Therefore, set up styles as combination of "cell type" (input, calculation), format (%, multiple, number)

and number of digits

Example:

Shortcut to styles selection dropdown:

A-h-j (English Excel) A-r-l (German Excel)


Additional best practise / Do’s & Don’t’s for Financial Models

No hard-coding of values in formulas

Don’t use circular references

Protect every cell but data input/assumption cells

Avoid manual formatting as much as possible, use styles instead

Use error-checks

Model contains P&L, balance sheet and cash flow statement

– All three are interlinked

– Make the balance sheet balance from the start – without a fudge!!!

KISS – "Keep It Simple, Stupid!"

– Assume that other users/the client only understands Excel basics

– Must be easy to audit/review by most users

– Better to avoid great Excel tricks/hacks for the sake of simplicity

and understandability

Don’t hide rows or columns, use grouping instead and "fold" cells

away

Use the same formula in a row and/or column as much as possible

– avoid individual changes

Don't use built-in scenarios

!


Perform sanity checks and track changes while using the spreadsheet

model

18

▪ Sanity check

–Put yourself in “manager mode” – “What numbers/order of

magnitude change would I expect?”. Investigate potential

deviations!

–Does the comparison to back-of-the-envelope calculation look

reasonable? (e.g. are the savings approximately xM DKK.)

–Do the totals and subtotals look reasonable?

(e.g. does the sum of “Sales in 2008” make sense?)

–Set assumptions to extremes (e.g. 0% or 100%) and see if result

is in line with expectations

▪ Documentation of the tool

–Track reasons for changes in value

–Update documentation

Be creative, as

you won’t be

able to check each

formula once you get

beyond the one-pager


Formatting Analysis


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Structure and features of the training model

▪ Single sheet approach (limited complexity, data tables)

▪ Each module is 19 columns x 44 rows

▪ Print settings optimized to display each module on one page (on A4 and Letter)

▪ Central "document properties" to steer header and footer of each module/page:

- TRAINING MODEL (12/07/13) - C:\Users\Peter\Documents\d2i\Training\Finance\New training\Exercises\[Full model.xlsb]M odel

Module header

Module content

© data2impact

data2impact Financial Modelling 1

▪ Module titles are linked into Table of Content

Table of content

Page Page

Assumptions 2 DCF analyses

DCF analysis 10

Financial statements Sensitivity analysis (using EBITDA exit multiple method) 11

Profit & Loss statement 3 Sensitivity analysis (using Perpetuity growth rate method) 12

Balance Sheet 4

Cash flow 5 DCF support

Weighted average cost of capital 13

Detailed calculations Beta Calculation 14

Working capital 6 Sanity check: Gordon-Shapiro Model 15

Properties, plant & equipment 7

Net debt adjustments (pension costs and operating lease) 8

Debt refinancing 9 Output

Executice Summary 16


Exercise 1 – Populate P&L

Main task ▪ Populate P&L for 2013-2019

▪ Use assumptions from assumptions sheet

▪ If no assumption is provided, assume constant

Additional task ▪ Familiarize yourself with the model structure

Useful

keyboard

shortcuts

▪ Quick navigation in worksheet with and arrow keys to corner or border of

current table

▪ Selection with and arrow keys

▪ Combination of quick navigation and selection to select ranges

C

S


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Exercise 2 – NWC

Main task ▪ Calculate forecast for Current assets (rows 265:269) and Current liabilities (rows

270:272)

▪ To calculate Accounts receivable and Accounts payable, assume 365d for a year

▪ Integrate result into Balance sheet

▪ Calculate Net Working Capital and link into Cashflow statement

Additional task ▪ Investigate implementation of central switches in Y35:Y47

Useful

keyboard

shortcuts

▪ Populate selection with the same formula (without changing format!)

▪ Edit existing formula

CE

@


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Using flags to ease modelling

▪ Formula for depreciation itself is trivial

▪ "Complex" check, if depreciation occurs in the period is shifted to a helper/flag cell (purple cell below)

▪ Flag cell calculates check, if period has depreciation

▪ Often, flag cells can be verified visually without checking the formula ("triangle shape" in this example)


Exercise 3 – Properties, plants & equipment (PPE)

Main task ▪ Calculate Capex in L310:S310 using assumption in H299

▪ Copy rows 319:329 to row 333 and label as "Support matrix"

▪ Group the new rows 334:344 (Data tab->Group)

▪ Populate L336:S343 with one formula to be 1 if Capex from row 310 is written off in

the year indicated in column E, else 0. Try to use one formula!

Tipp: Instead of "=IF(Condition1;IF(Condition2;1;0);0)" use

"=(Condition1)*(Condition2)"

▪ Calculate total depreciation for each year in T322:T329, transpose to L331:S331

and link result to L311:S311

Additional task ▪ Look at custom format of E329

▪ Investigate solution in Full Model without support matrix and using TRANSPOSE

function

▪ Investigate alternative solution in Full Model with array formulas

Useful

keyboard

shortcuts

▪ Select row

▪ Select column

▪ Copy

▪ Insert (row/column/cell/copy selection) or move cut selection

▪ Group

▪ Ungroup

▪ Toggle cell link fixing (A1$A$1A$1$A1A1)

▪ AutoSum (creates SUM formula to contingent range of numbers top or

left of cell)

S+space

CSQ

C+space

Cc

S++

CSR

$

SA0


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Exercise 4 – Pensions

Main task ▪ Populate L345:R347, using central assumptions

▪ Link L347:R347 into Balance sheet

▪ Define names for multiples in M105 and M106

▪ Use names to populate and calculate H355:H357 and M355:M357

Additional task ▪ Investigate implementation of "semi-automatic" TOC in D37:D38

Useful

keyboard

shortcuts

▪ When in formula: Evaluate current selection

Else: Recalculate model (if Manual Calculation is activated)

▪ Exit Formula editing, discarding input

▪ Insert name from dialog

▪ Name manager

(

#

A>i>d>n

X


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Exercise 5 – Debt financing

Main task ▪ Populate L397:R407

Additional task ▪ Investigate link back to TOC in each header row

Useful

keyboard

shortcuts

▪ Filling down/right

▪ Paste special dialog

Sd,Sr

Situation ▪ Existing debt (230 €m) is refinanced mid 2013 with a term loan

▪ The amortization period of the new loan is assumed to be 1 year but must be

modelled flexible to assess CF impacts

▪ After the amortization period, the loan will be repaid in fixed rates over a tenor of 8

years (to be also flexible)

(in M€) Current Projection

2013 2014 2015 2016 2017 2018 2019

Term loan

Amortization period TRUE FALSE FALSE FALSE FALSE FALSE FALSE

Loan period 8 7 6 5 4 3

Draw down 230,4 - - - - - -

Financing fee (rate) 1,0% 1,0% 1,0% 1,0% 1,0% 1,0% 1,0%

Financing fee (2,3) - - - - - -

Amount outstanding 230,4 236,2 206,6 177,1 147,6 118,1 88,6

Interest rate 5,0% 5,0% 5,0% 5,0% 5,0% 5,0% 5,0%

Interest accrued (5,8) - - - - - -

Interest payment - (11,1) (9,6) (8,1) (6,6) (5,2) (3,7)

Amortization - (29,5) (29,5) (29,5) (29,5) (29,5) (29,5)

Amount remaining 236,2 206,6 177,1 147,6 118,1 88,6 59,0

Summary

Interest payments (17) (11) (10) (8) (7) (5) (4)

Amortization (230) (30) (30) (30) (30) (30) (30)

CAv


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Exercise 6 – DCF

Main task ▪ Understand setup of Beta Calculation sheet and WACC sheet

▪ Populate L431:S451

Additional task ▪ Investigate MAX formula used for page numbers

Useful

keyboard

shortcuts

▪ Undo latest action(s)

▪ After Undo: Redo

Else: Repeat last action but apply to current selection

Cz

Cy

(in M€) Current Projection Terminal

2013 2014 2015 2016 2017 2018 2019 year

Sales 632,9 651,8 684,4 718,7 747,4 769,8 789,1 806,4

Growth 3,0% 5,0% 5,0% 4,0% 3,0% 2,5% 2,2%

EBITDA 88,0 90,6 95,1 99,9 103,9 107,0 109,7 112,1

Operational lease adjustment 22,2 22,8 24,0 25,2 26,2 26,9 27,6 28,2

EBITDA adjusted 110,1 113,4 119,1 125,0 130,0 133,9 137,3 140,3

% of sales 17,4% 17,4% 17,4% 17,4% 17,4% 17,4% 17,4% 17,4%

Depreciation (53) (59) (66) (73) (81) (88) (96) (52)

EBIT 57,4 54,2 53,0 51,8 49,3 45,5 40,9 88,6

% of sales 9,1% 8,3% 7,7% 7,2% 6,6% 5,9% 5,2% 11,0%

Tax (17) (16) (16) (16) (15) (14) (12) (27)

Tax rate 30,0% 30,0% 30,0% 30,0% 30,0% 30,0% 30,0% 30,0%

NOPAT 40,2 37,9 37,1 36,2 34,5 31,8 28,7 62,0

% of sales 6,3% 5,8% 5,4% 5,0% 4,6% 4,1% 3,6% 7,7%

+ Depreciation 53 59 66 73 81 88 96 52

- Capex (44) (46) (48) (50) (52) (54) (55) (56,5)

+ Change NWC (10) 1 2 2 2 1 1 -

Unlevered Free Cash Flow 39 53 57 61 65 68 71 57

Discount power 0,5 1,0 2,0 3,0 4,0 5,0 6,0

WACC 7,8% 7,8% 7,8% 7,8% 7,8% 7,8% 7,8%

Discount factor 1,0x 0,9x 0,9x 0,8x 0,7x 0,7x 0,6x

PV of unlevered Free Cash Flow 37 49 49 49 48 46 45


Exercise 7 – TV

Main task ▪ Populate H454:H465 and Q454:H465

Additional task ▪ Investigate setup of "Check style" (applied in line 230)

Useful

keyboard

shortcuts

▪ Bold

▪ Underline

▪ Italics

▪ Apply percentage format

Cb

Method 1: EBITDA exit multipleEBITDA 140,3

EBITDA exit multiple 8,0x

Terminal value 1.122,6

Discount factor 0,6x

Discounted terminal value 714,7

PV of unlevered Free Cash Flow 323,7

Enterprise value 1.038,4

Existing debt (236)

Operating lease adjustment (399)

Unfundeded pension liabilities (54)

Existing cash 84

Implied equity value 433

Method 2: Perpetuity growth rateUnlevered Free Cash Flow 57,3

Perpetuity growth rate 2,2%

Terminal value 1.019,9

Discount factor 0,6x

Discounted terminal value 649,3

PV of unlevered Free Cash Flow 323,7

Enterprise value 973,0

Existing debt (236)

Operating lease adjustment (399)

Unfundeded pension liabilities (54)

Existing cash 84

Implied equity value 368

Cu

Ci

G5


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Data tables

▪ Data tables are a great tool to quickly calculate different scenarios based on one or two parameters,

e.g.: (in M€) EBITDA exit multiple

1.038 6,0x 7,0x 8,0x 9,0x 10,0x

6,8% 900 995 1.089 1.183 1.278

7,3% 880 971 1.063 1.155 1.247

7,8% 860 949 1.038 1.128 1.217

8,3% 840 927 1.014 1.101 1.188

8,8% 822 906 991 1.075 1.160

WA

CC

▪ Data tables (German: "Mehrfachoperationen") are located in the "Data" tab in the "What-If-Analysis"

dropdown

▪ To apply:

1. Top left cell: must be linked to the result cell that you want to show as result (for visual purposes font

color can be white)

2. Left column and top row must provided values for the two input parameters (Attention: the original

input parameter cannot be linked directly into the header, this leads to wrong results!)

3. Select the full table (including header) and apply the data table

4. First parameter ("row input cell") will be changed to all elements from header row

5. "Column input cell" will be changed to elements from first column

Attention: Both input cells must be located on the same sheet as the data table!

To prevent restructuring of model, create blank parameter cell in data table sheet and use this

cell as input to data table.

In the calculation, build in one more step/cell:

=IF(ISBLANK(DataTableCell);OriginalAssumptionCell;DataTableCell)


Exercise 8 – Sensitivities

Main task ▪ Understand setup of sensitivity analysis for EBITDA multiple on p11

▪ Replicate to sensitivity analysis for Perpetuity growth rate method on p12

Additional task ▪ Check what happens to the graphs when columns U:AI get folded! Why does it not

happen to the graphs on p11? (Tipp: Check in "Select data")

▪ Use the "Trace Precedents" and "Trace Dependents" functionality "Formulas" tab to

understand formula structure of a calculation chain (e.g. try "Trace Dependents"

multiple times on I478, "Trace Precedents" on Z498)

Useful

keyboard

shortcuts

▪ Change zoom level C + mouse wheel


Content


▪ Profit & Loss



▪ Pensions

▪ Debt financing


▪ Sensitivities

▪ Sanity checks


Exercise 9 – Sanity check

Main task ▪ Calculate the NOPLAT (I652) and implied RONIC (I654)

▪ Build the sensitivity analysis in E661:J666

Additional task ▪ Reformat cells using the "Format cells" dialog – without using the mouse!

Useful

keyboard

shortcuts

▪ "Format cells" dialog

▪ Previous/next sheet

When in dialog: previous/next tab

▪ Activate next/previous element in dialog box

▪ Activates the field in the dialog with the corresponding

underlined letter

▪ "Ok" and "Cancel"

In "Border" tab of "Formal cells" dialog:

▪ Top

▪ Bottom

▪ Left

▪ Right

▪ Horizontal

▪ Vertical

▪ Outside

▪ Inside

▪ None

C1

CO, CN

T, CT

A+letter

E, X

Ct

Cb

Cl

Cr

Ch

Cv

Co

Ci

Cn

131203 financial modelling - excel

Documents

noncurrent assets

intangible assets

gross profit

training model

net income

zurich project manager

fleet management

mckinsey company