Centex Valuation
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1Scott Meadow
Centex Valuation
Summer 2002
Scott Meadow
University of Chicago
2Scott Meadow
June 1985 July AugustDifference Difference
Total Revenue $ 271,800 $ 310,500 =$12K $ 372,800 =$11K -Cost of Service $ 197,500 $ 216,600 $ 264,000
Management Fee $ 74,300 $ 93,900 $ 108,800 - Operating Expenses $ 191,600 $ 228,800 $ 323,800
Earnings before Interest and Taxes
$ (117,300) $ (134,900) $ (215,000)
Current Assets $ 517,800 $ 636,700 $1,311,600
Total Assets $ 766,700 $ 920,100 $1,617,000
Current Liabilities $ 516,700 $ 799,300 $ 983,600 Total Liabilities $ 691,200 $ 949,300 $1,133,600 Total Capital $ (75,500) $ (29,200) $ 483,400
NWC $ 1,100 $ (162,600) $ 328,000 Ch. NWC / Ch. Sales $ (4) $ 8
Pro Forma Income Statement Projections
Pro Forms Balance Sheet Projections
3Scott Meadow
September October November December
Total Revenue $ 474,400 $ 623,500 $ 793,300 $ 959,600 -Cost of Service $ 335,700 $ 441,600 $ 559,200 $ 674,100
Management Fee $ 138,700 $ 181,900 $ 234,100 $ 285,500 - Operating Expenses $ 325,800 $ 384,000 $ 460,200 $ 433,300
Earnings before Interest and Taxes
$ (187,100) $ (202,100) $ (226,100) $ (147,800)
Current Assets $ 1,338,100 $ 1,302,400 $ 1,364,200 $ 1,494,900
Total Assets $ 1,660,700 $ 1,683,300 $ 1,767,800 $ 1,924,300
Current Liabilities $ 1,146,800 $ 1,355,300 $ 1,666,900 $ 1,971,400 Total Liabilities $ 1,296,800 $ 1,505,300 $ 1,816,900 $ 2,121,400 Total Capital $ 363,900 $ 178,000 $ (49,100) $ (197,100)
NWC $ 191,300 $ (52,900) $ (302,700) $ (476,500)Ch. NWC / Ch. Sales $ (1) $ (2) $ (1) $ (1)
Pro Forma Income Statement Projections
Pro Forms Balance Sheet Projections
4Scott Meadow
July JuneCurrent Assets 636.70$ - 517.80$ = (118.90)$ Current Liabilities 799.30$ - 516.70$ = 282.60$
Change in NWC 162.60$ - (1.10)$ = 163.70$
Change in Sales 310.50$ - 271.80$ = 38.70$ = 423%
5Scott Meadow
Tax Rate 40.00%Assume NWC/Sales -20%TV growth 5%Risk Free Rate 12%Discount Rate 19%Hurdle Rate 50%
1985 1986 1987 1988
Total Revenue 3,805,900.00$ 23,782,711.00$ 32,582,687.00$ 34,211,821.35$ -Cost of Service (2,688,700.00)$ (16,801,433.32)$ (23,018,227.10)$ (24,169,138.46)$
Gross Margin 1,117,200.00$ 6,981,277.68$ 9,564,459.90$ 10,042,682.89$
- Operating Expenses (2,347,500.00)$ (6,000,000.00)$ (6,000,000.00)$ (6,300,000.00)$
Earnings before Interest and Taxes (1,230,300.00)$ 981,277.68$ 3,564,459.90$ 3,742,682.89$
Pro Forma Income Statement Projections
6Scott Meadow
Earnings before Interest and Taxes (1,230,300.00)$ 981,277.68$ 3,564,459.90$ 3,742,682.89$ Taxes -$ -$ (1,326,175.03)$ (1,497,073.16)$ Increase in NWC 761,180.00$ 3,995,362.20$ 1,759,995.20$ 325,826.87$
FCF (469,120.00)$ 4,976,639.88$ 3,998,280.06$ 2,571,436.60$ TV 18,750,058.57$ FCF+TV (469,120.00)$ 4,976,639.88$ 3,998,280.06$ 21,321,495.18$
Tax loss carryforward (1,230,300.00)$ (249,022.32)$
Value (12% Discount Rate) 19,695,752$ Value (19% Discount Rate) 15,937,400$ Value (50% Discount Rate) 7,295,422$
7Scott Meadow
350,000$ / 2.25$ Share = 155,556100,000$ / 0.45$ Warrant = 222,222
Total Investment = 450,000$ = 377,778
Total Investment
Angel Investors Average Cost
Theoretical Average Share Price
Total Shares= =
Total Shares
450,000$
377,7781.19$
8Scott Meadow
Equity Value/Share 0.45/ShareDollars Invested $1,000,000Percentage Ownership 0.54%Valuation Post-Money
$1mm / 0.54 $1,850,000Valuation Pre-Money $ 850,000
On Exposure
Equity Invested $1,000,000
Debt Obligation $1,000,000
Total Exposure $2,000,000
Percentage Ownership 54%
Valuation Post-Money 2.0 / 0.54 = $3,700,000
Valuation Pre-Money $3.7mm - $2.0mm=$1,700,000
Centex
9Scott Meadow
Equity Value/Share 0.67/ShareDollars Invested $1,500,000Percentage Ownership 0.54%Valuation Post-Money
$1.5 mm / 0.54 $2,777,000Valuation Pre-Money $1,277,000
On ExposureEquity Invested $1,500,000Debt Obligation $1,500,000Debt Conversion to Equity $ 350,000Total Exposure $3,350,000Percentage Ownership 59%Valuation Post-Money 3.350 / 0.59 = $5,662,000Valuation Pre-Money $5.662mm - $3.350 = $2,312,00
Centex