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The impact of working capital investment on the value of a company
RMA Journal, The, April, 2003 by Dev Strischek
Exhibit 2 Green Corporation Shareholder Value: $998 Shareholder Value Per Share: $35.66 Units: $000s Year 2001 2002 2003 2004 2005 Sales (Year 0) 1,648 G 15.0% 15.0% 15.0% 15.0% P 13.7% 13.7% 13.7% 13.7% T 41.0% 41.0% 41.0% 41.0% F 25.0% 25.0% 25.0% 25.0% W 10.0% 10.0% 10.0% 10.0% K 10.0% 10.0% 10.0% 10.0% N 5 5 5 5 Mkt. Securities 10 10 10 10 Mkt. Value Debt 1,007 1,007 1,007 1,007 # of Shares 28 28 28 28 Sales 1,648.0 1,895.2 2,179.5 2,506.4 2,882.4 Operating Costs 1,635.6 1,880.9 2,163.0 2,487.5 Operating Profit 259.6 298.6 343.4 394.9 Taxes 106.5 122.4 140.8 161.9 NOPAT 153.2 176.2 202.6 233.0 Incr. F 61.8 71.1 81.7 94.0 Incr. W 24.7 28.4 32.7 37.6 Cash Flow (CF) 66.7 76.7 88.2 101.4 Discount Factor 0.9091 0.8264 0.7513 0.6830 PV of CF 60.6 63.4 66.2 69.3 Cum PV of CF 60.6 124.0 190.2 259.5 Residual Value (RV) 1,531.9 1,761.7 2,025.9 2,329.8 PV of Perpetuity RV 1,392.6 1,455.9 1,522.1 1,591.3 Mkt. Securities 10.0 10.0 10.0 10.0 Corporate Value (CV) 1,463.2 1,589.9 1,722.3 1,860.8 2,005.5 Mkt Value of Debt 1,007.0 1,007.0 1,007.0 1,007.0 Shareholder Value (SHV) $456.2 $582.9 $715.3 $853.8 Year 2006 Sales (Year 0) G 15.0% P 13.7% T 41.0% F 25.0% W 10.0% K 10.0% N 5 Mkt. Securities 10 Mkt. Value Debt 1,007 # of Shares 28 Sales 3,314.7 Operating Costs 2,860.6 Operating Profit 454.1 Taxes 186.2 NOPAT 267.9 Incr. F 108.1 Incr. W 43.2 Cash Flow (CF) 116.6 Discount Factor 0.6209 PV of CF 72.4 Cum PV of CF 331.9 Residual Value (RV) 2,679.3 PV of Perpetuity RV 1,663.6 Mkt. Securities 10.0 Corporate Value (CV) 2,156.8 Mkt Value of Debt 1,007.0 Shareholder Value (SHV) $998.5 Exhibit 3 Green Corporation Shareholder Value: $952 Shareholder Value Per Share: $33.99 Units: $000s Year 2001 2002 2003 2004 2005 Sales (Year 0) 1,648 G 15.0% 15.0% 15.0% 15.0% P 13.7% 13.7% 13.7% 13.7% T 41.0% 41.0% 41.0% 41.0% F 25.0% 25.0% 25.0% 25.0% W 13.8% 13.8% 13.8% 13.8% K 10.0% 10.0% 10.0% 10.0% N 5 5 5 5 Mkt. Securities 10 10 10 10 Mkt. Value Debt 1,007 1,007 1,007 1,007 # of Shares 28 28 28 28 Sales 1,648.0 1,895.2 2,179.5 2,506.4 2,882.4 Operating Costs 1,635.6 1,880.9 2,163.0 2,487.5 Operating Profit 259.6 298.6 343.4 394.9 Taxes 106.5 122.4 140.8 161.9 NOPAT 153.2 176.2 202.6 233.0 Incr. F 61.8 71.1 81.7 94.0 Incr. W 34.1 39.2 45.1 51.9 Cash Flow (CF) 57.3 65.9 75.7 87.1 Discount Factor 0.9091 0.8264 0.7513 0.6830 PV of CF 52.1 54.4 56.9 59.5 Cum PV of CF 52.1 106.5 163.4 222.9 Residual Value (RV) 1,531.9 1,761.7 2,025.9 2,329.8 PV of Perpetuity RV 1,392.6 1,455.9 1,522.1 1,591.3 Mkt. Securities 10.0 10.0 10.0 10.0 Corporate Value (CV) 1,454.7 1,572.4 1,695.5 1,824.2 Mkt Va!ue of Debt 1,007.0 1,007.0 1,007.0 1,007.0 Shareholder Value (SHN) $447.7 $565.4 $688.5 $817.2 Share Price $15.99 $20.19 $24.59 $29.19 Year 2006 Sales (Year 0) G 15.0% P 13.7% T 41.0% F 25.0% W 13.8% K 10.0% N 5 Mkt. Securities 10 Mkt. Value Debt 1,007 # of Shares 28 Sales 3,314.7 Operating Costs 2,860.6 Operating Profit 454.1 Taxes 186.2 NOPAT 267.9 Incr. F 108.1 Incr. W 59.7 Cash Flow (CF) 100.2 Discount Factor 0.6209 PV of CF 62.2 Cum PV of CF 285.1 Residual Value (RV) 2,679.3 PV of Perpetuity RV 1,663.6 Mkt. Securities 10.0 Corporate Value (CV) 1,958.7 Mkt Va!ue of Debt 1,007.0 Shareholder Value (SHN) $951.7 Share Price $33.99
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