Condensed Operating and Stockholder Information, Nicholson File Company, 967 - 1971 (millions of dollars except per-share data)1967 1968 1969 1970

OperationsNet Sales $48.5 $49.1 $53.7 $54.7 Cost of goods sold

Depreciation expenseInterest expenseOther deductionsIncome before taxesTaxesNet Income

Percentage of SalesCost of goods sold

Income before taxes

Stockholder InformationEarnings per shareDividends per shareBook value per shareMarket pricePrice/earnings ratio

From Balance SheetAccounts receivablesAccounts payableInventoriesNet plant and equipmentCurrent LiabiliitesLong term DebtCommon Stock

Step 1: Find Average Sales Growth

Net Sales $48.5 $49.1 $53.7 $54.7 Growth 1.24% 9.37% 1.86%Average Sales Growth

Step 2: Find Industry GrowthIndustry Growth

Selling, general and administrative expenses

Selling genereal and administrative expenses

Step 3: Find Cost of DebtLong Term DebtInterest ExpenseCost of Debt

Step 4: Find Cost of EquityMarket price per share, pDividend per share, dGrowth rate, g

Step 4: Find WACCWeight of DebtWeight of EquityTax RateWACC

Step 5:

1972 1973 1974 1975Net Sales $57.18 $59.11 $62.66 $66.42 Cost of Goods Sold $37.16 $38.42 $40.73 $43.17 Gross Profit $20.01 $20.69 $21.93 $23.25

$10.86 $11.23 $11.91 $12.62 Less: Depreciation expense $2.10 $2.10 $2.10 $2.10 Interest expense $0.80 $0.80 $0.80 $0.80 Other deductions $0.20 $0.20 $0.20 $0.20 Income before taxes $6.85 $7.16 $7.73 $8.33 Taxes $2.74 $2.86 $3.09 $3.33 Net Income $4.11 $4.29 $4.64 $5.00 Add: Depreciation expense $2.10 $2.10 $2.10 $2.10 Cash Flow (EBTDA) $6.21 $6.39 $6.74 $7.10 Less: Retention for Growth $1.24 $1.28 $1.35 $1.42

Terminal Value

Working CapitalAccounts Receivable $8.27 $8.55 $9.06 $9.61 Accounts payable $2.07 $2.14 $2.27 $2.40 Inventories $18.61 $19.24 $20.40 $21.62

Change in Working CapitalChange in Accounts Receivable $0.27 $0.28 $0.51 $0.54

Cost of equity, Ke

Selling, general and administrative expenses

Change in Accounts payable $0.07 $0.07 $0.13 $0.14 Change in Inventories $0.61 $0.63 $1.15 $1.22 Change in Net Working Capital $0.95 $0.98 $1.80 $1.90

Capital ExpenditureNet Plant and Equipment $16.54 $17.10 $18.13 $19.22 Change in Capital Expenditure $0.54 $0.56 $1.03 $1.09

Add: CF + Terminal Value - Change in Net Working Capital - Chage in Capital ExpenditureNet Cash Flow to Cooper $3.47 $3.57 $2.57 $2.69

Present Value of Cash Flow $66.89 millionLoan amount $12.00 Cashflow to stockholders $54.89 millionNumber of shares outstanding 584000Earnings per share $93.99

Current Market price of stock $44 Number of shares outstanding 584000value to stockholders $25.70 million

1.8 sharesPorter 177000 318600Nicholson 117000 210600VLN 14000 25200

Upper bound

Lower bound

Condensed Operating and Stockholder Information, Nicholson File Company, 967 - 1971 (millions of dollars except per-share data)1971

$55.3 $37.9

$12.3 $2.1 $0.8 $0.2

$2.02 $0.67 $1.35

23-32

82

1816

41231

$55.3 1.10%3.39%

6% (given)

$12.0 $0.8

6.67% Kd = interest/long-term debt

27.5 Average share price in 19711.66% (given)

11.82%

0.340.6640%

9.16%

Input Details1976 Comments Input value

$70.41 $45.76 Reduces from 69% to 65% of sales 65%$24.64

$13.38 Reduces from 22% to 19% of sales 19%$2.10 Same trend since 1971$0.80 Assumed no new loans taken$0.20 Same trend since 1971$8.96 $3.59 Tax at 40% 40%$5.38 $2.10 $7.48 $1.50 Retention Ratio 20%

$85.27 After 1976, CF is expected to grow @ 2%

$10.19 A/R to Sales Ratio in 1971 14%$2.55 A/P to Sales Ratio in 1971 4%

$22.92 Inventories to Sales Ratio in 1971 33%

$0.58

ke = d/p) + g

$0.14 $1.30 $2.02

$20.37 Net PPE to sales Ratio in 1971 29% Note: For change in capex we should consider: Gross fixed assets, accummulated depreciation and net fixed assets$1.15

$88.09

Note: For change in capex we should consider: Gross fixed assets, accummulated depreciation and net fixed assets

Condensed Operating and Stockholder Information, Nicholson File Company, 967 - 1971 (millions of dollars except per-share data)1967 1968 1969 1970

OperationsNet Sales $48.5 $49.1 $53.7 $54.7 Cost of goods sold

Depreciation expenseInterest expenseOther deductionsIncome before taxesTaxesNet Income

Percentage of SalesCost of goods sold

Income before taxes

Stockholder InformationEarnings per shareDividends per shareBook value per shareMarket pricePrice/earnings ratio

From Balance SheetAccounts receivablesAccounts payableInventoriesNet plant and equipmentCurrent LiabiliitesLong term DebtCommon Stock

Step 1: Find Average Sales Growth

Net Sales $48.5 $49.1 $53.7 $54.7 Growth 1.24% 9.37% 1.86%Average Sales Growth

Step 2: Find Industry GrowthIndustry Growth

Selling, general and administrative expenses

Selling genereal and administrative expenses

Step 3: Find Cost of DebtLong Term DebtInterest ExpenseCost of Debt

Step 4: Find Cost of EquityMarket price per share, pDividend per share, dGrowth rate, g

Step 4: Find WACCWeight of DebtWeight of EquityTax RateWACC

Step 5:

1972 1973 1974 1975Net Sales $57.18 $59.11 $62.66 $66.42 Cost of Goods Sold $37.16 $38.42 $40.73 $43.17 Gross Profit $20.01 $20.69 $21.93 $23.25

$10.86 $11.23 $11.91 $12.62 Less: Depreciation expense $2.10 $2.10 $2.10 $2.10 Interest expense $0.80 $0.80 $0.80 $0.80 Other deductions $0.20 $0.20 $0.20 $0.20 Income before taxes $6.85 $7.16 $7.73 $8.33 Taxes $2.74 $2.86 $3.09 $3.33 Net Income $4.11 $4.29 $4.64 $5.00 Add: Depreciation expense $2.10 $2.10 $2.10 $2.10 Cash Flow $6.21 $6.39 $6.74 $7.10 Less: Retention for Growth $1.24 $1.28 $1.35 $1.42

Terminal Value

Working CapitalAccounts Receivable $8.27 $8.55 $9.06 $9.61 Accounts payable $2.07 $2.14 $2.27 $2.40 Inventories $18.61 $19.24 $20.40 $21.62

Change in Working CapitalChange in Accounts Receivable $0.27 $0.28 $0.51 $0.54

Cost of equity, Ke

Selling, general and administrative expenses

Change in Accounts payable $0.07 $0.07 $0.13 $0.14 Change in Inventories $0.61 $0.63 $1.15 $1.22 Change in Net Working Capital $0.95 $0.98 $1.80 $1.90

Capital ExpenditureNet Plant and Equipment $16.54 $17.10 $18.13 $19.22 Change in Capital Expenditure $0.54 $0.56 $1.03 $1.09

Add: CF + Terminal Value - Change in Net Working Capital - Chage in Capital ExpenditureNet Cash Flow to Cooper $3.47 $3.57 $2.57 $2.69

Present Value of Cash Flow $66.89 millionLoan amount $12.00 Cashflow to stockholders $54.89 millionNumber of shares outstanding 584000Value per share $93.99

Current Market price of stock $44 Number of shares outstanding 584000Cashflow to stockholders $25.70 million

Upper bound

Lower bound

Condensed Operating and Stockholder Information, Nicholson File Company, 967 - 1971 (millions of dollars except per-share data)1971

$55.3 $37.9

$12.3 $2.1 $0.8 $0.2

$2.02 $0.67 $1.35

23-32

82

1816

41231

$55.3 1.10%3.39%

6% (given)

$12.0 $0.8

6.67% Kd = interest/long-term debt

27.5 Average share price in 19711.66% (given)

11.82%

0.340.6640%

9.16%

Input Details1976 Comments Input value

$70.41 $45.76 Reduces from 69% to 65% of sales 65%$24.64

$13.38 Reduces from 22% to 19% of sales 19%$2.10 Same trend since 1971$0.80 Assumed no new loans taken$0.20 Same trend since 1971$8.96 $3.59 Tax at 40% 40%$5.38 $2.10 $7.48 $1.50 Retention Ratio 20%

$85.27 After 1976, CF is expected to grow @ 2%

$10.19 A/R to Sales Ratio in 1971 14%$2.55 A/P to Sales Ratio in 1971 4%

$22.92 Inventories to Sales Ratio in 1971 33%

$0.58

ke = d/p) + g

$0.14 $1.30 $2.02

$20.37 Net PPE to sales Ratio in 1971 29%$1.15

$88.09