Assignment As a member of Ms. Jerabek’s team, you are responsible for estimating the value of Teuer Furniture. You should use discounted cash flow to value the firm. The questions below should help...

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Assignment As a member of Ms. Jerabek’s team, you are responsible for estimating the value of Teuer Furniture. You should use discounted cash flow to value the firm. The questions below should help guide your analysis. Pro forma financials. To value Teuer Furniture, the first step is to construct a pro forma income statement and pro forma balance sheet. Fill out the tabs in the excel labeled “Teuer IS pro forma and Teuer BS Pro forma.” You should use the assumptions and data from the case. Templates have been provided for you.1 As a check that your numbers are correct, verify that the balance sheet balances.2 Discounted cash flow. Value Teuer Furniture by constructing the cash flow from assets for the next six years (2013 to 2018). Your value should not include the 2012 cash flows. You will need to include a terminal value in your valuation. Assume that the long term growth rate of Teuer Furniture’s cash flows is 3.5% and their firm’s cost of capital is 12.1%. What is the value of Teuer Furniture on a per share basis? Fill out the tab “Teuer CFA Pro Forma” Key assumptions. Discounted cash flow analysis depends upon a large number of assumptions. The value of Teuer that you calculate is a function of the assumptions made by Teuer’s finance team. Which of these assumptions are the most crucial? Think about what makes an assumption crucial in a valuation. Crucial assumptions are both empirically relevant as well as ones that cannot be precisely measured. Would you change any of the crucial assumptions? If so, how? What impact do your different assumptions have on the valuation? Note- do not change the discount rate assumption of 12.1% -- even if you believe this assumption to be crucial. Hints: · The case may use the term “cash flow to assets (CFA).” This is what I refer to as “free cash flows (FCF).” · Note also that the case may use the acronym CGS for cost of goods sold, where I use the acronym COGS. · Different from the written case, the online exhibits provide you with store level income statement and balance sheet information for all stores by age, except for 2010, 2011, and 2012. Use the information for the other stores as a guide to your work for 2010, 2011, and 2012. 1 In the appendix of your submission, you should include income statement and balance sheet for Teuer Furniture, as well as the store level income statement and balance sheet. This helps me in the unlikely event that there is an error. 2 This check only works if you construct the equity numbers on the balance sheet in the correct method. If you calculate equity as assets minus liabilities, then this check will be meaningless. Please do the following 1. Fill out the excel file- Tabs. Instructions above 2. Draft an answer to the following answers a. what the value of Teuer is according to Jerabek’s assumptions b. what the key assumptions are c. what assumptions, if any, you would change and the impact of those changes on the valuation. Please support your answer with logic, the facts from the case, and intuition The case 2 The Case Teuer Furniture A
assignment-teuer-furniture-zs4nqdf4.docx teuer-furniture-partially-completed-needs-to-be-filled-in-bnandv3u.xlsx teuer-furniture-a-rdayu3nb-c1lkhmrj.docx
Answered 12 days AfterJan 12, 2021

Answer To: Assignment As a member of Ms. Jerabek’s team, you are responsible for estimating the value of Teuer...

Pallavi answered on Jan 25 2021
164 Votes
Exh 1 Stores
    Exhibit 1: Teuer Furnitures Showrooms and Square Footage
            Stores    Total    SQ FT    Total                                                                                    Depreciation schedule for Construction coat
            Opened    Stores    Opened    SQ FT                                                     Cost pr sq ft    SQ Ft opened*no. of stores    Construction cost incurred    Construction cost incurred in ' $000    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    2019    Total
        2003    1    1    17,200    17,200                                                2003    20.8139534884    17200    358000    358    71.6    71.6    71.6    71.6    71.6                                                    358
        2004    3    4    17,600    70,000                                                2004    22.2537878788    52800    1175000    1175        235    235    235    235    235                                                1175
        2005    4    8    18,500    144,000                                                2005    24.5135135135    74000    1814000    1814            362.8    362.8    362.8    362.8    362.8                                            1814
        2006    5    13    21,100    249,500                                                2006    28.1611374408    105500    2971000    2971                594.2    594.2    594.2    594.2    594.2                                        2971
        2007    6    19    22,100    382,100                                                2007    30.6033182504    132600    4058000    4058                    811.6    811.6    811.6    811.6    811.6                                    4058
        2008    2    21    15,500    413,100                                                2008    29.8064516129    31000    924000    924                        184.8    184.8    184.8    184.8    184.8                                924
        2009    1    22    14,500    427,600                                                2009    27.1724137931    14500    394000    394                            78.8    78.8    78.8    78.8    78.8                            394
        2010    2    24    14,700    457,000                                                2010    25.5782312925    29400    752000    752                                150.4    150.4    150.4    150.4    150.4                        752
        2011    2    26    15,400    487,800                                                2011    25.9090909091    30800    798000    798                                    159.6    159.6    159.6    159.6    159.6                    798
        2012    3    29    16,300    536,700                                                2012    26.4417177914    48900    1293000    1293                                        258.6    258.6    258.6    258.6    258.6                1293
        2013    2    31    16,000    568,700                                                2013    26.8859386503    32000    860350.036809816    860.3500368098                                            172.070007362    172.070007362    172.070007362    172.070007362    172.070007362            860.3500368098
        2014    2    33    16,000    600,700                                                2014    27.3725741399    32000    875922.372476074    875.9223724761                                                175.1844744952    175.1844744952    175.1844744952    175.1844744952    175.1844744952        875.9223724761
        2015    2    35    15,000    630,700                                                2015    27.9036020782    30000    837108.062345728    837.1080623457                                                    167.4216124691    167.4216124691    167.4216124691    167.4216124691    167.4216124691    837.1080623457
                                                                                            71.6    306.6    669.4    1263.6    2075.2    2188.4    2032.2    1819.8    1385.2    832.2    819.470007362    915.8544818572    932.8760943263    773.2760943263    514.6760943263    342.6060869644    167.4216124691    17110.3804716316
                                                                                                                        Gross Value of PPE        14537    15397.3500368098    16273.2724092859    17110.3804716316    17110.3804716316    17110.3804716316    17110.3804716316
                                                                                                                        Accumulated Dep        12644.2    13463.670007362    14379.5244892191    15312.4005835455    16085.6766778718    16600.3527721981    16942.9588591625    167.4216124691
                                                                                                                        WDV        1892.8    1933.6800294479    1893.7479200668    1797.9798880861    1024.7037937598    510.0276994335    167.4216124691    -167.4216124691
                                                                                                                                3920
                                                                                                                                2027.2    2027.2    2027.2    2027.2    2027.2    2027.2    2027.2    2027.2
Number of Showrooms    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    1    4    8    13    19    21    22    24    26    29    31    33    35    Total Square Feet    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    17200    70000    144000    249500    382100    413100    427600    457000    487800    536700    568700    600700    630700    
Exh 2 Econ Indicators
    Exhibit 2: Economic Indicators: GDP and Furniture Sales Growth
        2002    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    2019
    CPI index    180.9    184.3    190.3    196.8    201.8    210.0    210.2    215.9    219.2    225.7    229.6    233.5    237.7    242.3    247.4    252.1    256.6    261.3
     Inflation (CPI)        1.9%    3.3%    3.4%    2.5%    4.1%    0.1%    2.7%    1.5%    3.0%    1.7%    1.7%    1.8%    1.9%    2.1%    1.9%    1.8%    1.8%
    GDP (T$)    10,642    11,142    11,853    12,623    13,377    14,029    14,292    13,974    14,499    15,076    15,685    16,238    17,049    18,012    19,021    20,078    21,101
     GDP growth         4.7%    6.4%    6.5%    6.0%    4.9%    1.9%    -2.2%    3.8%    4.0%    4.0%    3.5%    5.0%    5.6%    5.6%    5.6%    5.1%
    Furniture sales ($B)    94.44    96.7    103.8    109.1    112.8    111.1    99.6    86.3    87.3    90.1    93.1    95.9    98.6    101.2    103.6    105.9    108.0    110.2
     Furniture sales growth        2.4%    7.3%    5.2%    3.4%    -1.5%    -10.4%    -13.4%    1.2%    3.2%    3.4%    3.0%    2.8%    2.6%    2.4%    2.2%    2.0%    2.0%
GDP Growth    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    4.6975277900453971E-2    6.3813556089560075E-2    6.4935777107544501E-2    5.9752276607290655E-2    4.870040068175685E-2    1.8738405444562733E-2    -2.2243913361391865E-2    3.7590393347479045E-2    3.9778811187725971E-2    4.0401176066743316E-2    3.5256921532061281E-2    4.996266107377223E-2    5.6493429214464985E-2    5.5980104579205436E-2    5.5592571155693049E-2    5.0974434189059892E-2    Furniture Sales Growth    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    2.4354087251164724E-2    7.2565639859416997E-2    5.1657671549730111E-2    3.3724340175953049E-2    -1.4716312056737513E-2    -0.10419290984344065    -0.13358778625954193    1.1940644562949299E-2    3.1847863443693392E-2    3.4000000000000002E-2    0.03    2.8000000000000001E-2    2.5999999999999999E-2    2.4E-2    2.1999999999999999E-2    0.02    Inflation (CPI)    2003    2004    2005    2006    2007    2008    2009    2010    2011    2012    2013    2014    2015    2016    2017    2018    1.8794914317302513E-2    3.255561584373301E-2    3.4156594850236477E-2    2.5406504065040636E-2    4.0812685827551931E-2    9.1412900645604367E-4    2.7213311262058282E-2    1.4957235273143077E-2    2.9624188448710953E-2    1.7410223687475579E-2    1.6799999999999999E-2    1.8100000000000002E-2    1.9400000000000001E-2    2.1100000000000001E-2    1.9E-2    1.7999999999999999E-2    
Exh 3 Teuer IS
    Exhibit 3: Teuer Furniture Income Statement
            2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
        Sales        2,057    10,415    26,701    51,540    79,191    90,680    111,451    134,093    148,218
        Cost of goods sold        -1,463    -7,057    -17,424    -30,730    -43,834    -47,290    -49,068    -55,487    -61,955
        Selling, general and admin        -410    -1,812    -4,958    -9,230    -13,576    -14,679    -16,471    -18,698    -21,253
         Advertising        -203    -1,019    -2,411    -4,588    -6,585    -7,532    -8,367    -9,545    -10,744
         Depreciation        -72    -307    -669    -1,264    -2,075    -2,188    -2,032    -1,820    -1,450
        Lease         -250    -1,080    -2,330    -4,240    -6,770    -7,380    -7,712    -8,450    -9,320
        Corporate expense        -185    -729    -1,602    -3,092    -4,751    -5,441    -5,573    -6,705    -7,411
         Taxable income        -526    -1,588    -2,693    -1,604    1,600    6,170    22,229    33,389    36,086
         Tax loss carry forward         526    2,114    4,807    6,411    4,811    0    0    0    0
        Taxes        0    0    0    0    0    -543    -8,892    -13,356    -14,434
        Net income        -526    -1,588    -2,693    -1,604    1,600    5,626    13,337    20,033    21,651
    Parameters:
        Corporate tax rate    40%
Exh 4 Teuer BS
    Exhibit 4: Teuer Furniture Balance Sheet
            2003    2004    2005    2006    2007    2008    2009    2010    2011    2012
    Assets
        Accounts Receivable    0    751    3,479    8,675    16,946    25,272    29,059    36,625    42,421    48,200
        Inventory    671    3,151    8,216    15,125    20,908    21,715    24,868    26,808    29,216    33,343
     Total Current Assets        671    3,902    11,695    23,800    37,853    46,987    53,927    63,433    71,637    81,543
        PPE    358    1,461    2,969    5,270    8,065    6,914    5,119    3,839    3,142    3,920
     Total Assets        1,029    5,364    14,663    29,070    45,918    53,900    59,046    67,272    74,779    85,463
    Liabilities and Equity
        Accounts Payable    236    1,158    2,781    5,119    7,228    7,767    8,277    9,133    9,986    11,364
        Accrued Expenses    29    145    358    658    958    1,055    1,203    1,359    1,519    1,682
     Total Current Liabilities         265    1,303    3,139    5,777    8,186    8,822    9,480    10,493    11,505    13,046
        Debt    0    0    0    0    0    0    0    0    0    0
        Equity    764    4,061    11,525    23,293    37,732    45,079    49,565    56,779    63,274    72,417
     Total Liabilities and Equity        1,029    5,364    14,663    29,070    45,918    53,900    59,046    67,272    74,779    85,463
        Balance sheet check                                        
Exh 5 Stores IS
    Exhibit 5: Teuer Furniture Income Statement for Individual Showrooms
            #    Avg...
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