Year

Book value of pre project investmet

Depreciation
Initial investment
Investment for capacity expansion
Capital Maintanance
Depreciation
Book value of New Fixed Assets
Book Value of Working Capital
Total Capital Invested in Project

0
200

1
180
20

2
160
20

2000

1000

500

2000

400
2600

520
2580

516
2064

2740

229.82
2434

2200

2780

3
140
20

4
120
20

5
100
20

6
80
20

7
60
20

8
40
20

9
20
20

10
0
20

11

1172
413
1651

330
1321

264
1057

246
811

231
1752

336
1415

315
1100

95
1005

304.51
2076

387.34
1808

479.01
1616

580.28
1451

691.99
2484

815.00
2250

863.90
1964

915.74
1921

12

13

14

15

16

17

18

19

85
920

77
843

69
774

62
711

56
655

50
605

45
560

41
519

970.68
1890

843

774

711

655

605

560

519

20

21

22

23

24

25

26

27

37
482

33
449

30
419

27
392

24
368

22
346

20
327

18
309

482

449

419

392

368

346

327

309

28

16
293
293

Year
Straight Line
Double Depreciation
Year
Investment
Book value
slm
dd
dep used
Net book value

1
10%
20%
0
2000

2000

Depreciation of rest investment

Year
Investment
book value
slm
dd
dep used
Net book value

1
500
2000
200
400
400
2100

1
500

Assuming 151 is salvage value

Depreciation for capacity expansion investment
Year
investment
book value
dd
dep
net book value

8
1172
1172
10%
0
1172

1
9
1172
1172
117
1054

2
11%

3
13%

4
14%

5
17%

6
20%

7
25%

8
33%

2100
233
420
420
1680

1680
210
336
336
1344

1344
192
269
269
1075

1075
179
215
215
860

860
172
172
172
688

688
172
138
172
516

516
172
103
172
344

2
500
500

900

720

576

461

369

295

100
100
900

180
180
720

144
144
576

115
115
461

92
92
369

74
74
295

59
59
236

2
10
1054
1054

3
11
949
949

4
12
854
854

5
13
769
769

6
14
692
692

7
15
623
623

8
16
560
560

105
949

95
854

85
769

77
692

69
623

62
560

56
504

9
50%

10
100%

10

344
172
69
172
172

172
172
34
172
0

10

236

189

47
47
189

38
38
151

9
17
504
504

10
18
454
454

11
19
409
409

12
20
368
368

13
21
331
331

14
22
298
298

15
23
268
268

50
454

45
409

41
368

37
331

33
298

30
268

27
241

16
24
241
241

17
25
217
217

18
26
195
195

19
27
176
176

20
28
158
158

24
217

22
195

20
176

18
158

16
142

Year
Global market
growth rate
GAP Market share
Total Revenue
COGS
Gross Profit(30% of revenue)
G&A Cost(firm)
G&A Cost(new segment)
Additional G&A
Total G&A For Segment
Logistic & distribution(firm) capacity
Growth rate
Capacity rqrd by new segment
Advertising expense(firm)
Advertising expense(firm) Growth Rate
Advertsing expense with new segment
Advertising expense of new segment
working capital:
Accounts Receivable
Inventory
Accounts Payable
Total Working Capital Requirements

0
72000
6%

1
76320

3000

3150
315
315

70%
3.5%

73.5%

1000
5%

1050

Depreciation
Operating Income(EBIT)
Tax
EBIT*(1-Tax rate)
Book Value of Capital Invested
ROC
Average ROC

400

2200
4.06%

-715
(286.00)
(429.00)
2780
-15%

2
80899.2

3
4
5
6
7
85753.152 90898.34112 96352.24159 102133.3761 108261.3786

331

2%
1715
1200.54
515
3473
347
100
447

2.50%
2272
1590.72
682
3647
365
133
497

3%
2891
2023.40
867
3829
383
169
551

3.50%
3575
2502.27
1072
4020
402
208
610

4%
4330
3031.32
1299
4221
422
252
675

77.0%

80.5%

84.0%

87.5%

91.0%

94.5%

1103

8.0%
1158

10.6%
1216

13.5%
1276

16.7%
1340

20.2%
1407

1273
116

1337
122

1404
128

1474
134

1548
141

3308
331

85.75
240.11
96.04
229.82

113.62
318.14
127.26
304.51

144.53
404.68
161.87
387.34

178.73
500.45
200.18
479.01

216.52
606.26
242.51
580.28

520

516

413

330

264

246

-851
(340.30)
(510.45)
2740
-19%

-565
(225.81)
(338.72)
2434
-14%

-350
(139.91)
(209.86)
2076
-10%

-142
(56.85)
(85.27)
1808
-5%

64
25.50
38.25
1616
2%

238
95.22
142.82
1451
10%

8
114757.0614

9
10
11
121642.485 128941.0342 136677.4962

12
144878.146

4.50%
5164
3614.85
1549
4432
443
301
744

5%
6082
4257.49
1825
4654
465
355
820

5.00%
6447
4512.94
1934
4887
489
376
865

5.00%
6834
4783.71
2050
5131
513
398
912

5.00%
7244
5070.74
2173
5388
539
422
961

98.0%

101.5%

105.0%

108.5%

112.0%

24.1%
1477

28.4%
1551

30.1%
1629

31.9%
1710

33.8%
1796

1625
148

1706
155

1792
163

1881
171

1975
180

258.20
722.97
289.19
691.99

304.11
851.50
340.60
815.00

322.35
902.59
361.03
863.90

341.69
956.74
382.70
915.74

362.20
1,014.15
405.66
970.68

231

336

315

95

85

426
170.45
255.67
2484
10%

513
205.24
307.86
2250
14%

591
236.57
354.85
1964
18%

873
349.06
523.60
1921
27%

947
378.82
568.23
1890
30%

Regression Beta For GAP

GAP Rating
Default Spread
Stock Price
Outstanding Shares
Total Debt( ST + LT)
Average Maturity (yrs)
Interest

1.04
BBB1.65%
39.9
446
1394
6
61

Country Risk Premium

Market risk premium
Rf
Rm
Unlevered Beta
D/E
Levered Beta
Cost of Equity
Cost of Debt
After tax Cost of Debt
MV of Equity
MV of Debt
D/(D+E)
Cost of Capital(WACC)

0%
5.75%
2.50%
5.75%
1.09
0.38
1.34
10.22%
4.15%
2.49%
17,795.40
6,733.33
0.2745
8.10%

Sensitivity Analysis

Stock
Price

1,964.99
30.00
35.00
39.90
44.90
49.90
54.90
59.90
64.90

Sensitivity Analysis of NPV( Perpetuity)

Debt Equity Ratio
0.2
0.3
0.38
0.5

0.6

0.7

Companies

Levered Betas

V.F. Corporation
Ralph Lauren Corporation
Coach, Inc.
PVH Corp.
Under Armour, Inc.
Hanesbrands Inc.
Fossil Group, Inc.
Fifth & Pacific Companies, Inc.
Carter's, Inc.
Columbia Sportswear Company
Iconix Brand Group, Inc.
Tumi Holdings, Inc.
G-III Apparel Group, Ltd.
Quiksilver Inc.
Oxford Industries Inc.
The Jones Group Inc.
Movado Group, Inc.
Apparel Holding Corp.
Vera Bradley, Inc.
Unifi Inc.
Costa Inc.
Culp, Inc.
Perry Ellis International Inc.
Sequential Brands Group, Inc.
American Apparel, Inc.
Delta Apparel Inc.
Cherokee Inc.
Charles & Colvard Ltd.
Superior Uniform Group Inc.
Crown Crafts, Inc.

1.1
1.1
1
1.5
1
1.2
1.1
1.3
1.2
1.1
1.5
1
1.2
1.8
1.2
2.5
1
1.2
1.1
1.1
1.1
1
1.9
1.4
4.7
2
1.1
1
1.2
1
1.3866666667

Unlevered Beta

Total Debt including Leases

3,069.8
2,621.1
895.9
5,740.5
220.2
1,662.2
1,048.6
1,062.8
1,125.5
227.6
1,454.0
104.3
415.6
1,152.4
454.6
1,772.5
41.6
250.8
118.7
103.5
36.5
10.4
331.9
60.2
514.8
134.7
15.3
0.5
27
1.9

1.0936348724

Market Cap

27,448.6
15,951.4
15,742.4
11,102.2
9,221.8
6,964.4
6,621.3
3,936.4
3,914.4
2,716.8
2,047.6
1,530.4
1,508.7
1,486.5
1,324.0
1,192.3
1,118.1
1,112.2
976.2
521.3
286.7
250.5
236.8
136.5
135.9
133.7
116
101.6
98.4
76.6

D/E
0.1118381265
0.1643178655
0.056910001
0.5170596819
0.0238782017
0.2386709551
0.1583676921
0.2699928869
0.2875281014
0.0837750294
0.7100996288
0.0681521171
0.2754689468
0.7752438614
0.3433534743
1.4866224943
0.0372059744
0.225499011
0.1215939357
0.1985421063
0.1273107778
0.0415169661
1.4016047297
0.441025641
3.7880794702
1.0074794316
0.1318965517
0.0049212598
0.2743902439
0.0248041775
0.4465716447

Assumptions
Dep of pre project investment over 10 yrs using SLM
gross profit margin
G&A Cost(firm) growth rate
% share of G&A Cost(new segment)
additional G&A IN 3RD Year

inflation
inc in advertising expense
Accounts Receivable (% of revenue)
Inventory( % of COGS)
Accounts payable (% of COGS)
Tax Rate
Terminal Growth (US GDP growth rate)

30%
5%
10%
100

2%
10%
5%
20%
8%
40%
2.40%

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

Sensitivity Analysis for NPV (Perpetuity)

Gross Profit Margin
1,964.99
20%
25.00%
30.00%
35.00%
7%
8.00%
9.00%
10.00%
11.00%
12.00%

40.00%

Year
Operating Income after Tax
Add Depreciation
Capex
Working Capital
Less Changes in Working Cap
FCFF
Add Sunk Cost
Pre project Depreciation
Incremental Cash flows
Terminal Value
Total Incremental Cash flow
NPV (Longer Life)
IRR (Longer Life)
NPV (Project terminated after 12 years)
IRR

0
2200

(2,200.00)
200
(2,000.00)
(2,000.00)
1,964.99
12.77%
(2,264.86)
-4.32%

1
(429.00)
400
1000
(1,029.00)
8.00
(1,021.00)
(1,021.00)

2
(510.45)
520
500
-

3
(338.72)
516

4
(209.86)
413

5
(85.27)
330

6
38.25
264

(490.45)

229.82
229.82
(52.54)

304.51
74.69
128.25

387.34
82.83
162.14

479.01
91.67
210.77

8.00
(482.45)

8.00
(44.54)

8.00
136.25

8.00
170.14

(482.45)

(44.54)

136.25

170.14

7
142.82
246

9
307.86
336

580.28
101.28
287.31

8
255.67
231
1172
691.99
111.70
(796.68)

8.00
218.77

8.00
295.31

8.00
(788.68)

8.00
529.22

218.77

295.31

(788.68)

529.22

815.00
123.02
521.22

10
354.85
315

11
523.60
95

12
568.23
85

863.90
48.90
621.18

915.74
51.83
566.67

970.68
54.94
598.70

8.00
629.18

566.67

629.18

566.67

598.70
10,764.67
11,363.36

Year
Debt Payment
Interest Payment
NPV
Operating Lease
NPV
Total Market Value of Debt

61

61

1,105

1,087

1,410

5,323
6,733

3
61

915

4
###

738

5
61

586

6
1,394
61

1,716