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This excel provides a DCF valuation template which is a valuation method where future cash flows are discounted to present value. The valuation approach is widely used within the investment banking and private equity industry.
Regression analysis: Simple Linear Regression Multiple Linear Regression
Valuation Model (DCF)
1. Project AC/DC - Valuation Summary
($ in millions)
Representative Multiples Range Latest Quarter (1) Implied TEV Range
Methodology Level Low -- High Cash Total Debt Low -- High
Comparable Public Companies
TEV / Revenue
LTM $176.6 0.50x -- 0.60x 88.3 -- 106.0
FYE + 1 222.8 0.50x -- 0.60x 111.4 -- 133.7
TEV / EBITDA
LTM $15.8 9.0x -- 11.0x 142.1 -- 173.6
FYE + 1 18.6 8.0x -- 10.0x 148.6 -- 185.7
Price / Earnings
LTM $6.8 24.0x -- 28.0x $17.0 $36.9 182.4 -- 209.5
FYE + 1 8.1 18.0x -- 22.0x 17.0 36.9 165.7 -- 198.1
Precedent Transactions (2)
LTM Revenue $176.6 0.60x -- 0.70x 88.3 -- 103.0
LTM EBITDA 15.8 9.5x -- 10.5x 125.0 -- 138.1
Discounted Cash Flow (DCF) 164.3 -- 218.1
Median $142.1 -- $173.6
Mean $135.1 -- $162.9
(1) AC/DC does not have preferred stock or minority interest.
(2) Adjusted for a 20% acquisition premium.
2. Comparable Public Companies Analysis
($ in millions)
Comparable Companies - Consumer Electronics | Retail
THERE SHOULD BE NO HARDCODES ON THIS TAB
Multiples Analysis
Share
Price % of 52- Market Enterprise TEV / Revenue TEV / EBITDA Price / Earnings
Company Name Ticker 11/20/2006 week High Capitalization Value Cash Debt LTM FYE+1 LTM FYE+1 LTM FYE+1
Best Buy Co., Inc. BBY $54.63 8.2% $27,262.9 $24,903.9 $2,668.0 $680.0 0.76x 0.70x 10.8x 9.7x 21.9x 19.0x
Circuit City Stores, Inc. CC 23.55 25.3% 4,191.8 3,679.3 599.6 87.0 0.30x 0.28x 7.8x 7.3x 20.7x 18.0x
RadioShack Corp. RSH 17.88 25.3% 2,428.5 2,762.1 276.4 610.0 0.55x 0.56x 10.2x 9.0x 32.9x 24.9x
Median 25.3% $4,191.8 $3,679.3 $599.6 $610.0 0.55x 0.56x 10.2x 9.0x 21.9x 19.0x
Mean 19.6% $11,294.4 $10,448.4 $1,181.3 $459.0 0.54x 0.52x 9.6x 8.7x 25.2x 20.6x
Margins Analysis
Revenue Growth EBITDA Growth EPS Growth LTM CapEx % EBIT Margin EBITDA Margin Net Margin
Company Name FYE '05-06 FYE '06-07 FYE '05-06 FYE '06-07 FYE '05-06 FYE '06-07 of Revenue LTM FYE+1 LTM FYE+1 LTM FYE+1
Best Buy Co., Inc. 12.4% 14.9% 10.6% 22.2% 22.1% 26.1% 2.2% 5.6% 6.0% 7.1% 7.3% 3.8% 4.1%
Circuit City Stores, Inc. 10.8% 11.7% 36.9% 19.1% 68.6% 33.3% 1.7% 2.4% 2.6% 3.9% 3.9% 1.7% 2.0%
RadioShack Corp. 5.0% -3.2% -28.2% -35.1% -20.0% -63.8% 2.2% 2.8% 3.6% 5.4% 6.2% 1.5% 2.0%
Median 10.8% 11.7% 10.6% 19.1% 22.1% 26.1% 2.2% 2.8% 3.6% 5.4% 6.2% 1.7% 2.0%
Mean 9.4% 7.8% 6.4% 2.0% 23.6% -1.5% 2.0% 3.6% 4.1% 5.5% 5.8% 2.3% 2.7%
Source:
Company filings, Yahoo! Finance, equity analyst research and press releases.
3. Effective Tax Rate 35% FYE - 1 2005 FY + 1 2007P
Stock Valuation Date 11/20/2006 FYE 2006 FY + 2 2008P
Ticker BBY CC RSH
Name Best Buy Co., Inc. Circuit City Stores, Inc. RadioShack Corp. Company Name Company Name Company Name Company Name Company Name Company Name Company Name Company Name Company Name
Company Descriptions Best Buy Co., Inc. is
a specialty retailer of
consumer
electronics, home-
office products,
entertainment
software, appliances
and related services.
Circuit City Stores,
Inc. is a national
retailer of brand-
name consumer
electronics, personal
computers (PCs)
and entertainment
software.
RadioShack
Corporation is
primarily engaged in
the retail sale of
consumer electronic
goods and services
through its
RadioShack store
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Stock Price as of (11/20/06) $54.63 $23.55 $17.88 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
52 Wk High $59.50 $31.54 $23.95 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
52 Wk Low $42.75 $20.21 $13.73 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
% Off High 8.2% 25.3% 25.3% #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
Enterprise Value $24,903.9 $3,679.3 $2,762.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Equity Value $27,262.9 $4,191.8 $2,428.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
EV / Sales 0.81x 0.32x 0.54x NA NA NA NA NA NA NA NA NA
EV / LTM Sales 0.76x 0.30x 0.55x NA NA NA NA NA NA NA NA NA
EV / 2007P Sales 0.70x 0.28x 0.56x NA NA NA NA NA NA NA NA NA
EV / 2008P Sales 0.59x 0.26x 0.54x NA NA NA NA NA NA NA NA NA
EV / EBITDA 11.8x 8.7x 5.8x NA NA NA NA NA NA NA NA NA
EV / LTM EBITDA 10.8x 7.8x 10.2x NA NA NA NA NA NA NA NA NA
EV / 2007P EBITDA 9.7x 7.3x 9.0x NA NA NA NA NA NA NA NA NA
EV / 2008P EBITDA 8.3x 5.8x 6.9x NA NA NA NA NA NA NA NA NA
EV / EBIT 15.1x 14.3x 7.9x NA NA NA NA NA NA NA NA NA
EV / LTM EBIT 13.8x 12.3x 19.6x NA NA NA NA NA NA NA NA NA
EV / 2007P EBIT 11.8x 11.0x 15.5x NA NA NA NA NA NA NA NA NA
EV / 2008P EBIT 9.8x 7.9x 10.2x NA NA NA NA NA NA NA NA NA
Gross Margin 25.0% 24.4% 46.7% #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
LTM Gross Margin 24.9% 24.3% 45.2% #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0! #DIV/0!
EBITDA Margin 6.8% 3.6% 9.3% NA NA NA NA NA NA NA NA NA
LTM EBITDA Margin 7.1% 3.9% 5.4% NA NA NA NA NA NA NA NA NA
2007P EBITDA Margin 7.3% 3.9% 6.2% NA NA NA NA NA NA NA NA NA
2008P EBITDA Margin 7.1% 4.5% 7.8% NA NA NA NA NA NA NA NA NA
EBIT Margin 5.3% 2.2% 6.9% NA NA NA NA NA NA NA NA NA
LTM EBIT Margin 5.6% 2.4% 2.8% NA NA NA NA NA NA NA NA NA
2007P EBIT Margin 6.0% 2.6% 3.6% NA NA NA NA NA NA NA NA NA
2008P EBIT Margin 6.0% 3.3% 5.3% NA NA NA NA NA NA NA NA NA
Other Metric
Basic Shares Out. 480.3 175.2 135.8
Cash and Cash Equivalents $2,668.0 $599.6 $276.4
Total Debt on Balance Sheet 680.0 87.0 610.0
Less: Convertible Debt figured in FD Shares (402.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Preferred Equity 0.0 0.0 0.0
Less: Preferred Equity figured into FD Shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Minority Interest 31.0 0.0 0.0
Net Debt ($2,359.0) ($512.6) $333.6 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Current Debt $496.0 $38.8 $265.3
Total Current Liabilities 6,366.0 1,729.3 923.3
Total Current Assets 7,887.0 2,844.5 1,488.1
Net Working Capital ($651.0) $554.4 $553.7 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Shareholders' Equity $5,434.0 $1,915.3 $600.9
Total Assets $12,407.0 $4,129.9 $1,984.5
F.D. Shares Outstanding 499.0 178.0 135.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Equity Value $27,262.9 $4,191.8 $2,428.5 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
Net Debt (2,359.0) (512.6) 333.6 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Enterprise Value $24,903.9 $3,679.3 $2,762.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0
5. Convertible Debt
Amount Outstanding $402.00 $0.00 $0.00
Conversion Price $46.00 $0.00 $0.00
Number of Shares 8.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amount of Debt to Subtract from Net Debt (402.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amount of Shares to add to FD Shares 8.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Preferred Equity - Convertible
Amount Outstanding $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Conversion Price $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
Number of Common Shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amount of Debt to Subtract from Net Debt 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Amount of Shares to add to FD Shares 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Number of Options Exercisable
A 19.60 0.37 2.44
B 0.98 4.31
C 1.75 1.84
D 0.25 3.91
E 0.50 4.93
F 0.83
G 0.12
H 4.08
I 1.10
Weighted Average Strike Price
A $26.60 $5.69 $19.88
B $7.40 $27.39
C $8.32 $31.29
D $10.06 $38.35
E $12.27 $47.10
F $14.43 $34.79
G $15.66
H $23.46
I $27.20
Calculation
A 10.1 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
B 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
C 0.0 1.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
D 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
E 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
F 0.0 0.3 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
G 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
H 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
I 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Sum 18.8 2.8 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
EPS 5 Yr Growth
FX Country
USD / FX
6. Precedent Transactions - Consumer Electronics | Retail
($ in millions)
Announce Target LTM Transaction Implied TEV /
Date Acquiror Target Target Description Revenue EBITDA Value Revenue EBITDA
02/22/06 Best Buy Co. (1) Pacific Sales & Kitchen Privately owned retailer of high-end
home improvement products that
perates 14 showrooms in Southern
California
$431.6 $58.6 $410.0 0.95x 7.00x
04/17/05 GameStop Corp. (2) Electronics Boutique Leading global specialty retailer of video
game hardware, software and related
accessories.
1,989.4 116.8 1,210.4 0.61x 10.4x
02/15/05 Highfields Capital
Management
Circuit City Stores National retailer of brand-name
consumer electronics, PCs and
entertainment software.
10,154.0 253.0 2,576.7 0.25x 10.2x
Median 0.61x 10.2x
Mean 0.60x 9.2x
Source:
(1) Best Buy Co. Press Release
(2) GameStop's 8K as of April 18, 2005, including Electronics Boutique's 10K as of January 29, 2005.
(3) Circuit City's 10Q as of November 30, 2004 and 10K as of February 29, 2004, including a Boston Business Journal article as of February 15, 2005.
7. Discounted Cash Flow (DCF) Analysis
BEST BUY CO. - EXAMPLE ONLY
Fiscal Year Ending ($MMs) 02/25/06 02/25/07 02/25/08 02/25/09 02/25/10 02/25/11
Revenue $30,848 $35,430 $42,426 $48,790 $56,108 $64,525
EBITDA $2,571 $3,006 $3,684 $4,236 $4,872
EBIT $2,119 $2,554 $2,927 $3,367 $3,871
Less: Estimated Taxes at 35% 742 894 1,025 1,178 1,355
Tax-effected EBIT $1,377 $1,660 $1,903 $2,188 $2,516
Plus: D&A 452 452 756 870 1,000
Less: CapEx (771) (923) (921) (1,059) (1,218)
Less: Changes in Working Capital (458) (700) (636) (732) (842)
Free Cash Flow $600 $490 $1,102 $1,267 $1,457
Assumed Tansaction Date of 11/20/06
PV of FCF @ a Discount Rate of 11% $584 $429 $870 $901 $933
Assumed EBITDA Exit Multiple of 9.0x
PV of Terminal Value of $28,084
TEV - Sensitivity Analysis Terminal EBITDA Multiple
$31,801 7.0x 8.0x 9.0x 10.0x 11.0x
9.0% 27,503 30,875 34,247 37,619 40,992
10.0% 26,508 29,752 32,995 36,238 39,482
11.0% 25,560 28,680 31,801 34,921 38,042
12.0% 24,655 27,658 30,661 33,664 36,667
13.0% 23,790 26,682 29,573 32,464 35,356
Source:
Discount
Rate
Links to 'Comp Spread' Tab
8. Discounted Cash Flow (DCF) Analysis - Project AC/DC
THERE SHOULD BE NO HARDCODES ON THIS TAB
Fiscal Year Ending ($MMs) 02/25/06 02/25/07 02/25/08 02/25/09 02/25/10 02/25/11
Revenue $185.7 $222.8 $267.4 $320.9 $385.1 $462.1
EBITDA $22.3 $26.7 $32.1 $38.5 $46.2
EBIT $20.1 $24.1 $28.9 $34.7 $41.6
Less: Estimated Taxes at 0% 7.0 8.4 10.1 12.1 14.6
Tax-effected EBIT $13.0 $15.6 $18.8 $22.5 $27.0
Plus: D&A 2.2 2.7 3.2 3.9 4.6
Less: CapEx (11.1) (13.4) (16.0) (19.3) (23.1)
Less: Changes in Working Capital 1.1 (0.8) (1.6) (2.2) (2.8)
Free Cash Flow $5.2 $4.2 $4.3 $4.9 $5.7
Assumed Tansaction Date of 11/20/06
PV of FCF @ a Discount Rate of 21% $4.9 $3.3 $2.8 $2.6 $2.5
Assumed EBITDA Exit Multiple of 8.5x
PV of Terminal Value of $174
TEV - Sensitivity Analysis Terminal EBITDA Multiple
$190 6.5x 7.5x 8.5x 9.5x 10.5x
19.0% 159.7 181.7 203.7 225.7 247.7
20.0% 154.4 175.6 196.8 218.1 239.3
21.0% 149.3 169.8 190.3 210.8 231.3
22.0% 144.5 164.3 184.0 203.8 223.6
23.0% 139.8 158.9 178.0 197.1 216.2
Source:
Discount
Rate
9. Weighted Average Cost of Capital (WACC) Analysis
($ in millions)
Comparable Companies
Market Debt to Preferred to Equity to
Preferred Value of Total Debt to Total Total Total
Debt Stock Equity Capitalization Equity Capitalization Capitalization Capitalization
Best Buy Co., Inc. $680.0 $0.0 $27,262.9 $27,942.9 2.5% 2.4% 0.0% 97.6%
Circuit City Stores, Inc. 87.0 0.0 4,191.8 4,278.9 2.1% 2.0% 0.0% 98.0%
RadioShack Corp. 610.0 0.0 2,428.5 3,038.5 25.1% 20.1% 0.0% 79.9%
Median $610.0 $0.0 $4,191.8 $4,278.9 2.5% 2.4% 0.0% 97.6%
Mean $459.0 $0.0 $11,294.4 $11,753.4 #DIV/0! 8.2% 0.0% 91.8%
Decile Adjusted Equity Size
Levered Unlevered Based Unlevered Risk Risk Cost of Cost of Cost of
Beta Beta Beta Beta Premium (1) Premium (1) Equity Debt Preferred WACC
Best Buy Co., Inc. 1.05 1.03 0.91 1.60 6.3% -0.37% 10.8% 4.7% 0.0% 10.7%
Circuit City Stores, Inc. 0.12 0.12 1.10 0.15 6.3% 0.75% 6.1% 5.4% 0.0% 6.1%
RadioShack Corp. 1.09 0.94 1.13 1.17 6.3% 1.07% 12.5% 6.8% 0.0% 10.9%
Median 1.05 0.94 1.10 1.17 10.8% 5.4% 0.0% 10.7%
Mean 0.75 0.70 1.05 0.97 9.8% 5.6% 0.0% 9.2%
Footnotes:
Source: Company filings, equity analyst research and Bloomberg.
Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1-Tax Rate) * Debt to Enterprise Value) + (Cost of Equity * Equity to Enterprise Value)
+ (Cost of Preferred * Preferred to Enterprise Value).
Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium) + Size Risk Premium.
Risk-free rate as of November 20, 2006.
(1) Ibbotson Associates, Stocks Bonds Bills and Inflation 2005 Yearbook, pp. 138, 140, 169, and 179.
10. Weighted Average Cost of Capital (WACC) Analysis (cont.)
Project AC/DC
Market Assumptions Beta Assumptions Capital Structure Assumptions
20-Year Treasury Bond Yield 4.6% Company Specific Decile Beta 1.41 Preferred to Enterprise Value 0.0%
Equity Risk Premium (1) 6.30% Selected Adjusted Unlevered Beta 1.17 Debt to Enterprise Value 2.4%
Size Risk Premium (1) 6.41% Levered Beta 1.19 Equity to Enterprise Value 97.6%
Company Specific Risk Premium 3.00% Cost of Debt 9.0%
Tax Rate 35.0% Cost of Preferred 0.0%
Cost of Equity 21.5%
Concluded Weighted Average Cost of Capital 21.1%
Footnotes:
Source: Company filings, equity analyst research and Bloomberg.
Weighted Average Cost of Capital (WACC) = (Cost of Debt * (1-Tax Rate) * Debt to Enterprise Value) + (Cost of Equity * Equity to Enterprise Value)
+ (Cost of Preferred * Preferred to Enterprise Value).
Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium) + Size Risk Premium.
Risk-free rate as of November 20, 2006.
(1) Ibbotson Associates, Stocks Bonds Bills and Inflation 2005 Yearbook, pp. 138, 140, 169, and 179.