GAP Workings.xlsx
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Transcript of GAP Workings.xlsx
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Year 0 1 2 3Book value of pre project investmet 200 180 160 140Depreciation 20 20 20
Initial investment 2000 1000 500Investment for capacity expansionCapital MaintananceDepreciation 400 520 516Book value of New Fixed Assets 2000 2600 2580 2064
Book Value of Working Capital 229.82 Total Capital Invested in Project 2200 2780 2740 2434
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4 5 6 7 8 9 10 11120 100 80 60 40 20 0
20 20 20 20 20 20 20
1172
413 330 264 246 231 336 315 951651 1321 1057 811 1752 1415 1100 1005
304.51 387.34 479.01 580.28 691.99 815.00 863.90 915.74 2076 1808 1616 1451 2484 2250 1964 1921
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12 13 14 15 16 17 18 19
85 77 69 62 56 50 45 41920 843 774 711 655 605 560 519
970.68 - - - - - - - 1890 843 774 711 655 605 560 519
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20 21 22 23 24 25 26 27
37 33 30 27 24 22 20 18482 449 419 392 368 346 327 309
- - - - - - - - 482 449 419 392 368 346 327 309
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28
16293
- 293
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Year 1Straight Line 10%Double Depreciation 20%
Year 0 1Investment 2000 500Book value 2000slm 200dd 400dep used 400Net book value 2000 2100
Depreciation of rest investmentYear 0 1Investment 500book valueslmdddep usedNet book value 0
Assuming 151 is salvage value
Depreciation for capacity expansion investment1
Year 8 9investment 1172 1172book value 1172 1172dd 10%dep 0 117net book value 1172 1054
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2 3 4 5 6 7 811% 13% 14% 17% 20% 25% 33%
2 3 4 5 6 7 8
2100 1680 1344 1075 860 688 516233 210 192 179 172 172 172420 336 269 215 172 138 103420 336 269 215 172 172 172
1680 1344 1075 860 688 516 344
2 3 4 5 6 7 8500500 900 720 576 461 369 295
100 180 144 115 92 74 59100 180 144 115 92 74 59900 720 576 461 369 295 236
2 3 4 5 6 7 810 11 12 13 14 15 16
1054 949 854 769 692 623 5601054 949 854 769 692 623 560
105 95 85 77 69 62 56949 854 769 692 623 560 504
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9 1050% 100%
9 10
344 172172 172
69 34172 172172 0
9 10
236 189
47 3847 38
189 151
9 10 11 12 13 14 1517 18 19 20 21 22 23
504 454 409 368 331 298 268504 454 409 368 331 298 268
50 45 41 37 33 30 27454 409 368 331 298 268 241
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16 17 18 19 2024 25 26 27 28
241 217 195 176 158241 217 195 176 158
24 22 20 18 16217 195 176 158 142
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Year 0 1 Global market 72000 76320 growth rate 6% GAP Market share Total Revenue COGS Gross Profit(30% of revenue) G&A Cost(firm) 3000 3150 G&A Cost(new segment) 315 Additional G&A Total G&A For Segment 315
Logistic & distribution(firm) capacity 70% 73.5% Growth rate 3.5% Capacity rqrd by new segment Advertising expense(firm) 1000 1050 Advertising expense(firm) Growth Rate 5% Advertsing expense with new segment Advertising expense of new segment working capital: Accounts Receivable Inventory Accounts Payable Total Working Capital Requirements
Depreciation 400
Operating Income(EBIT) -715 Tax (286.00) EBIT*(1-Tax rate) (429.00) Book Value of Capital Invested 2200 2780 ROC -15% Average ROC 4.06%
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2 3 4 5 6 780899.2 85753.152 90898.34112 96352.24159 102133.3761 108261.3786
2% 2.50% 3% 3.50% 4%1715 2272 2891 3575 4330
1200.54 1590.72 2023.40 2502.27 3031.32515 682 867 1072 1299
3308 3473 3647 3829 4020 4221331 347 365 383 402 422
100 133 169 208 252331 447 497 551 610 675
77.0% 80.5% 84.0% 87.5% 91.0% 94.5%
8.0% 10.6% 13.5% 16.7% 20.2%1103 1158 1216 1276 1340 1407
1273 1337 1404 1474 1548116 122 128 134 141
85.75 113.62 144.53 178.73 216.52 240.11 318.14 404.68 500.45 606.26 96.04 127.26 161.87 200.18 242.51 229.82 304.51 387.34 479.01 580.28
520 516 413 330 264 246
-851 -565 -350 -142 64 238 (340.30) (225.81) (139.91) (56.85) 25.50 95.22 (510.45) (338.72) (209.86) (85.27) 38.25 142.82
2740 2434 2076 1808 1616 1451-19% -14% -10% -5% 2% 10%
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8 9 10 11 12114757.0614 121642.485 128941.0342 136677.4962 144878.146
4.50% 5% 5.00% 5.00% 5.00%5164 6082 6447 6834 7244
3614.85 4257.49 4512.94 4783.71 5070.741549 1825 1934 2050 21734432 4654 4887 5131 5388
443 465 489 513 539301 355 376 398 422744 820 865 912 961
98.0% 101.5% 105.0% 108.5% 112.0%
24.1% 28.4% 30.1% 31.9% 33.8%1477 1551 1629 1710 1796
1625 1706 1792 1881 1975148 155 163 171 180
258.20 304.11 322.35 341.69 362.20 722.97 851.50 902.59 956.74 1,014.15 289.19 340.60 361.03 382.70 405.66 691.99 815.00 863.90 915.74 970.68
231 336 315 95 85
426 513 591 873 947 170.45 205.24 236.57 349.06 378.82 255.67 307.86 354.85 523.60 568.23
2484 2250 1964 1921 189010% 14% 18% 27% 30%
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Regression Beta For GAP 1.04GAP Rating BBB-Default Spread 1.65%Stock Price 39.9Outstanding Shares 446Total Debt( ST + LT) 1394Average Maturity (yrs) 6Interest 61
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Country Risk Premium 0%Market risk premium 5.75%Rf 2.50%Rm 5.75% Sensitivity Analysis of NPV( Perpetuity)Unlevered Beta 1.09 D/E 0.38 1,964.99 Levered Beta 1.34 30.00Cost of Equity 10.22% 35.00Cost of Debt 4.15% 39.90After tax Cost of Debt 2.49% 44.90MV of Equity 17,795.40 49.90MV of Debt 6,733.33 54.90D/(D+E) 0.2745 59.90Cost of Capital(WACC) 8.10% 64.90
Stock Price
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Sensitivity Analysis of NPV( Perpetuity)Debt Equity Ratio
0.2 0.3 0.38 0.5 0.6 0.7
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V.F. Corporation 1.1 3,069.8Ralph Lauren Corporation 1.1 2,621.1Coach, Inc. 1 895.9PVH Corp. 1.5 5,740.5Under Armour, Inc. 1 220.2Hanesbrands Inc. 1.2 1,662.2Fossil Group, Inc. 1.1 1,048.6Fifth & Pacific Companies, Inc. 1.3 1,062.8Carter's, Inc. 1.2 1,125.5Columbia Sportswear Company 1.1 227.6Iconix Brand Group, Inc. 1.5 1,454.0Tumi Holdings, Inc. 1 104.3G-III Apparel Group, Ltd. 1.2 415.6Quiksilver Inc. 1.8 1,152.4Oxford Industries Inc. 1.2 454.6The Jones Group Inc. 2.5 1,772.5Movado Group, Inc. 1 41.6Apparel Holding Corp. 1.2 250.8Vera Bradley, Inc. 1.1 118.7Unifi Inc. 1.1 103.5Costa Inc. 1.1 36.5Culp, Inc. 1 10.4Perry Ellis International Inc. 1.9 331.9Sequential Brands Group, Inc. 1.4 60.2American Apparel, Inc. 4.7 514.8Delta Apparel Inc. 2 134.7Cherokee Inc. 1.1 15.3Charles & Colvard Ltd. 1 0.5Superior Uniform Group Inc. 1.2 27Crown Crafts, Inc. 1 1.9
1.3866666667
Unlevered Beta 1.0936348724
Companies Levered Betas Total Debt including Leases
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D/E27,448.6 0.111838126515,951.4 0.164317865515,742.4 0.05691000111,102.2 0.51705968199,221.8 0.02387820176,964.4 0.23867095516,621.3 0.15836769213,936.4 0.26999288693,914.4 0.28752810142,716.8 0.08377502942,047.6 0.71009962881,530.4 0.06815211711,508.7 0.27546894681,486.5 0.77524386141,324.0 0.34335347431,192.3 1.48662249431,118.1 0.03720597441,112.2 0.225499011976.2 0.1215939357521.3 0.1985421063286.7 0.1273107778250.5 0.0415169661236.8 1.4016047297136.5 0.441025641135.9 3.7880794702133.7 1.0074794316116 0.1318965517
101.6 0.004921259898.4 0.274390243976.6 0.0248041775
0.4465716447
Market Cap
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AssumptionsDep of pre project investment over 10 yrs using SLMgross profit margin 30%G&A Cost(firm) growth rate 5%% share of G&A Cost(new segment) 10%additional G&A IN 3RD Year 100
inflation 2%inc in advertising expense 10%Accounts Receivable (% of revenue) 5%Inventory( % of COGS) 20%Accounts payable (% of COGS) 8%Tax Rate 40%Terminal Growth (US GDP growth rate) 2.40%
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Sensitivity Analysis for NPV (Perpetuity)Gross Profit Margin
1,964.99 20% 25.00% 30.00% 35.00% 40.00%7%
8.00% 9.00%
10.00% 11.00% 12.00%
Since additional capacity is required in 9th year so suitable investment will be made in 8th year to have ready capacity available in 9th year to support increaesd sales.
% Share of G&A Cost of
new segment
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Year 0 1Operating Income after Tax - (429.00)Add Depreciation 400Capex 2200 1000Working Capital - Less Changes in Working CapFCFF (2,200.00) (1,029.00)Add Sunk Cost 200Pre project Depreciation 8.00 Incremental Cash flows (2,000.00) (1,021.00)Terminal ValueTotal Incremental Cash flow (2,000.00) (1,021.00)NPV (Longer Life) 1,964.99 IRR (Longer Life) 12.77%NPV (Project terminated after 12 years) (2,264.86)IRR -4.32%
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2 3 4 5 6 7 8 9 (510.45) (338.72) (209.86) (85.27) 38.25 142.82 255.67 307.86
520 516 413 330 264 246 231 336500 1172
- 229.82 304.51 387.34 479.01 580.28 691.99 815.00 229.82 74.69 82.83 91.67 101.28 111.70 123.02
(490.45) (52.54) 128.25 162.14 210.77 287.31 (796.68) 521.22
8.00 8.00 8.00 8.00 8.00 8.00 8.00 8.00 (482.45) (44.54) 136.25 170.14 218.77 295.31 (788.68) 529.22
(482.45) (44.54) 136.25 170.14 218.77 295.31 (788.68) 529.22
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10 11 12 354.85 523.60 568.23
315 95 85
863.90 915.74 970.68 48.90 51.83 54.94 621.18 566.67 598.70
8.00 - - 629.18 566.67 598.70
10,764.67 629.18 566.67 11,363.36
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Year 0 1 2Debt PaymentInterest Payment 61 61 NPV 1,410
Operating Lease 1,105 1,087 NPV 5,323 Total Market Value of Debt 6,733
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3 4 5 6 1,394
61 ### 61 61
915 738 586 1,716
InvestmentDep scheduleReturnsCost Of CapitalBeta calculationInputsCash flowDebt Calculation