Forecast Methodologies

Free Cash Flow from Year -4 Year -3 Year -2 Last Year This Year
Cash Flow Statement: $190,000 $276,000 $310,000 $400,000

$512,659
Compounded 28.2%

$516,129
Straight-Line 29.0%
$460,000
Regression 15.0%

$500,000

$375,000 f(x) = 66400x + 128000

$250,000

$125,000

$0
Year -4 Year -3 Year -2 Last Year
Next Year Year +2 Year +3 Year +4

$657,049 $842,105 $1,079,283 $1,383,260

28.2% 28.2% 28.2% 28.2%

$665,973 $859,320 $1,108,800 $1,430,710

29.0% 29.0% 29.0% 29.0%
$526,400 $592,800 $659,200 $725,600
14.4% 12.6% 11.2% 10.1%
Weighted Average Cost of Capital (WACC) Calculation

Equity
Net Earnings
(From P&L)
Common Stock $93,200 Last Year $1,700,000
Additional Paid-In-Capital $1,535,141 Year -2 $1,500,000
Retained Earnings $3,400,000 Year -3 $1,000,000
Other Equity $3,800,000 Year -4 $900,000
Total Equity $8,828,341 Year -5 $1,200,000
5-year Total $1,260,000

Debt
Value Rate
Lines of credit $4,549,500 5.5%
Current portion of L/T debt $3,524,367 6.0%
L/T Debt net of current $11,296,362 9.0%
Capital Leases $567,966 10.5%
Other Debt $596,938 8.0%
Total: $20,535,133 7.7%

Total
Capitalization: $29,597,419
WACC: 12.4%
Owners Equity
(From B/S) Return
$8,055,931 21.1%
$7,263,570 20.7%
$5,165,346 19.4%
$3,878,013 23.2%
$2,187,581 54.9%
$5,310,088 23.7%
 Forecast Based on Compounded Annual Growth of Historical Cash Flows
Year -4 Year -3 Year -2 Last Year This Year Next Year Year +2 Year +3 Year +4
Periods Out -4 -3 -2 -1 1 2 3 4 5
Free Cash Flow $190,000 $276,000 $310,000 $400,000 $512,659 $657,049 $842,105 $1,079,283 $1,383,260
Implied Growth 45.3% 12.3% 29.0% 28.2% 28.2% 28.2% 28.2% 28.2%

Residual: Residual Growth

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $13,970,931 $14,779,046 $15,676,952 $16,680,494 $17,809,479
12.0% $12,700,846 $13,371,518 $14,109,257 $14,924,653 $15,830,648
12.4% $12,217,204 $12,839,055 $13,520,497 $14,270,526 $15,100,045
14.0% $10,746,870 $11,232,075 $11,757,714 $12,329,061 $12,952,348
15.0% $9,979,236 $10,400,070 $10,853,275 $11,342,736 $11,872,986

Residual Free Cash Flow:

Growth: WACC This Year Next Year Year +2 Year +3 Year +4 Residual PV of FCF
11.0% $461,855 $533,275 $615,740 $710,957 $820,898 $8,291,068 $11,433,793
12.0% $457,731 $523,795 $599,394 $685,904 $784,899 $7,206,801 $10,258,525
1.0% 12.4% $455,959 $519,746 $592,457 $675,339 $769,817 $6,799,162 $9,812,479
14.0% $449,701 $505,578 $568,397 $639,022 $718,422 $5,581,588 $8,462,707
15.0% $445,791 $496,823 $553,698 $617,083 $687,725 $4,961,444 $7,762,564
11.0% $461,855 $533,275 $615,740 $710,957 $820,898 $8,770,645 $11,913,370
12.0% $457,731 $523,795 $599,394 $685,904 $784,899 $7,587,359 $10,639,082
1.5% 12.4% $455,959 $519,746 $592,457 $675,339 $769,817 $7,145,237 $10,158,554
14.0% $449,701 $505,578 $568,397 $639,022 $718,422 $5,833,588 $8,714,708
15.0% $445,791 $496,823 $553,698 $617,083 $687,725 $5,170,673 $7,971,793
11.0% $461,855 $533,275 $615,740 $710,957 $820,898 $9,303,508 $12,446,234
12.0% $457,731 $523,795 $599,394 $685,904 $784,899 $8,005,971 $11,057,695
2.0% 12.4% $455,959 $519,746 $592,457 $675,339 $769,817 $7,524,475 $10,537,793
14.0% $449,701 $505,578 $568,397 $639,022 $718,422 $6,106,588 $8,987,708
15.0% $445,791 $496,823 $553,698 $617,083 $687,725 $5,395,996 $8,197,116
11.0% $461,855 $533,275 $615,740 $710,957 $820,898 $9,899,061 $13,041,787
12.0% $457,731 $523,795 $599,394 $685,904 $784,899 $8,468,649 $11,520,372
2.5% 12.4% $455,959 $519,746 $592,457 $675,339 $769,817 $7,941,884 $10,955,201
14.0% $449,701 $505,578 $568,397 $639,022 $718,422 $6,403,328 $9,284,448
15.0% $445,791 $496,823 $553,698 $617,083 $687,725 $5,639,345 $8,440,465
11.0% $461,855 $533,275 $615,740 $710,957 $820,898 $10,569,059 $13,711,784
12.0% $457,731 $523,795 $599,394 $685,904 $784,899 $8,982,735 $12,034,458
3.0% 12.4% $455,959 $519,746 $592,457 $675,339 $769,817 $8,403,531 $11,416,848
14.0% $449,701 $505,578 $568,397 $639,022 $718,422 $6,727,044 $9,608,164
15.0% $445,791 $496,823 $553,698 $617,083 $687,725 $5,902,972 $8,704,092
 Forecast Based on Straight-Line Projection of Most Recent Year's Growth
Year -4 Year -3 Year -2 Last Year This Year Next Year Year +2 Year +3 Year +4
Periods Out -4 -3 -2 -1 1 2 3 4 5
Free Cash Flow $190,000 $276,000 $310,000 $400,000 $516,129 $665,973 $859,320 $1,108,800 $1,430,710
Implied Growth 45.3% 12.3% 29.0% 29.0% 29.0% 29.0% 29.0% 29.0%

Residual: Residual Growth

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $14,450,167 $15,286,002 $16,214,708 $17,252,674 $18,420,386
12.0% $13,136,515 $13,830,192 $14,593,238 $15,436,603 $16,373,676
12.4% $12,636,282 $13,279,465 $13,984,282 $14,760,039 $15,618,012
14.0% $11,115,513 $11,617,362 $12,161,031 $12,751,977 $13,396,644
15.0% $10,321,548 $10,756,816 $11,225,567 $11,731,818 $12,280,257

Residual Free Cash Flow:

Growth: WACC This Year Next Year Year +2 Year +3 Year +4 Residual PV of FCF
11.0% $464,981 $540,519 $628,327 $730,401 $849,056 $8,575,471 $11,788,755
12.0% $460,829 $530,910 $611,647 $704,662 $811,823 $7,454,011 $10,573,883
1.0% 12.4% $459,045 $526,805 $604,568 $693,809 $796,224 $7,032,389 $10,112,839
14.0% $452,745 $512,445 $580,016 $656,499 $743,066 $5,773,049 $8,717,819
15.0% $448,808 $503,571 $565,017 $633,960 $711,316 $5,131,633 $7,994,305
11.0% $464,981 $540,519 $628,327 $730,401 $849,056 $9,071,498 $12,284,783
12.0% $460,829 $530,910 $611,647 $704,662 $811,823 $7,847,623 $10,967,494
1.5% 12.4% $459,045 $526,805 $604,568 $693,809 $796,224 $7,390,335 $10,470,785
14.0% $452,745 $512,445 $580,016 $656,499 $743,066 $6,033,694 $8,978,464
15.0% $448,808 $503,571 $565,017 $633,960 $711,316 $5,348,039 $8,210,710
11.0% $464,981 $540,519 $628,327 $730,401 $849,056 $9,622,640 $12,835,925
12.0% $460,829 $530,910 $611,647 $704,662 $811,823 $8,280,595 $11,400,466
2.0% 12.4% $459,045 $526,805 $604,568 $693,809 $796,224 $7,782,582 $10,863,033
14.0% $452,745 $512,445 $580,016 $656,499 $743,066 $6,316,059 $9,260,829
15.0% $448,808 $503,571 $565,017 $633,960 $711,316 $5,581,091 $8,443,762
11.0% $464,981 $540,519 $628,327 $730,401 $849,056 $10,238,622 $13,451,907
12.0% $460,829 $530,910 $611,647 $704,662 $811,823 $8,759,143 $11,879,015
2.5% 12.4% $459,045 $526,805 $604,568 $693,809 $796,224 $8,214,309 $11,294,759
14.0% $452,745 $512,445 $580,016 $656,499 $743,066 $6,622,977 $9,567,747
15.0% $448,808 $503,571 $565,017 $633,960 $711,316 $5,832,787 $8,695,458
11.0% $464,981 $540,519 $628,327 $730,401 $849,056 $10,931,602 $14,144,887
12.0% $460,829 $530,910 $611,647 $704,662 $811,823 $9,290,864 $12,410,735
3.0% 12.4% $459,045 $526,805 $604,568 $693,809 $796,224 $8,691,792 $11,772,242
14.0% $452,745 $512,445 $580,016 $656,499 $743,066 $6,957,797 $9,902,567
15.0% $448,808 $503,571 $565,017 $633,960 $711,316 $6,105,458 $8,968,129
 Forecast based on Statistical Regression of Historical Cash Flows
Year -4 Year -3 Year -2 Last Year This Year Next Year Year +2 Year +3 Year +4
Periods Out -4 -3 -2 -1 1 2 3 4 5
Free Cash Flow $190,000 $276,000 $310,000 $400,000 $460,000 $526,400 $592,800 $659,200 $725,600
Implied Growth 45.3% 12.3% 29.0% 15.0% 14.4% 12.6% 11.2% 10.1%

Residual: Residual Growth

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $7,328,560 $7,752,463 $8,223,467 $8,749,882 $9,342,100
12.0% $6,662,327 $7,014,133 $7,401,120 $7,828,842 $8,304,089
12.4% $6,408,629 $6,734,826 $7,092,282 $7,485,715 $7,920,846
14.0% $5,637,354 $5,891,872 $6,167,600 $6,467,304 $6,794,255
15.0% $5,234,686 $5,455,437 $5,693,169 $5,949,920 $6,228,067

Residual Free Cash Flow:

Growth: WACC This Year Next Year Year +2 Year +3 Year +4 Residual PV of FCF
11.0% $414,414 $427,238 $433,450 $434,235 $430,608 $4,349,144 $6,489,090
12.0% $410,714 $419,643 $421,943 $418,934 $411,725 $3,780,383 $5,863,342
1.0% 12.4% $409,124 $416,399 $417,060 $412,481 $403,813 $3,566,553 $5,625,430
14.0% $403,509 $405,048 $400,123 $390,299 $376,854 $2,927,865 $4,903,698
15.0% $400,000 $398,034 $389,776 $376,900 $360,751 $2,602,564 $4,528,025
11.0% $414,414 $427,238 $433,450 $434,235 $430,608 $4,600,710 $6,740,656
12.0% $410,714 $419,643 $421,943 $418,934 $411,725 $3,980,008 $6,062,967
1.5% 12.4% $409,124 $416,399 $417,060 $412,481 $403,813 $3,748,089 $5,806,966
14.0% $403,509 $405,048 $400,123 $390,299 $376,854 $3,060,054 $5,035,887
15.0% $400,000 $398,034 $389,776 $376,900 $360,751 $2,712,316 $4,637,777
11.0% $414,414 $427,238 $433,450 $434,235 $430,608 $4,880,227 $7,020,174
12.0% $410,714 $419,643 $421,943 $418,934 $411,725 $4,199,594 $6,282,553
2.0% 12.4% $409,124 $416,399 $417,060 $412,481 $403,813 $3,947,022 $6,005,898
14.0% $403,509 $405,048 $400,123 $390,299 $376,854 $3,203,258 $5,179,091
15.0% $400,000 $398,034 $389,776 $376,900 $360,751 $2,830,511 $4,755,972
11.0% $414,414 $427,238 $433,450 $434,235 $430,608 $5,192,629 $7,332,576
12.0% $410,714 $419,643 $421,943 $418,934 $411,725 $4,442,295 $6,525,254
2.5% 12.4% $409,124 $416,399 $417,060 $412,481 $403,813 $4,165,977 $6,224,853
14.0% $403,509 $405,048 $400,123 $390,299 $376,854 $3,358,915 $5,334,748
15.0% $400,000 $398,034 $389,776 $376,900 $360,751 $2,958,162 $4,883,623
11.0% $414,414 $427,238 $433,450 $434,235 $430,608 $5,544,082 $7,684,028
12.0% $410,714 $419,643 $421,943 $418,934 $411,725 $4,711,963 $6,794,922
3.0% 12.4% $409,124 $416,399 $417,060 $412,481 $403,813 $4,408,137 $6,467,014
14.0% $403,509 $405,048 $400,123 $390,299 $376,854 $3,528,723 $5,504,556
15.0% $400,000 $398,034 $389,776 $376,900 $360,751 $3,096,450 $5,021,911
Valuations by Methodology, Residual Growth, and WACC Assumptions

Compounded Residual Growth:

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $11,433,793 $11,913,370 $12,446,234 $13,041,787 $13,711,784
12.0% $10,258,525 $10,639,082 $11,057,695 $11,520,372 $12,034,458
12.4% $9,812,479 $10,158,554 $10,537,793 $10,955,201 $11,416,848
14.0% $8,462,707 $8,714,708 $8,987,708 $9,284,448 $9,608,164
15.0% $7,762,564 $7,971,793 $8,197,116 $8,440,465 $8,704,092

Straight-Line Residual Growth:

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $11,788,755 $12,284,783 $12,835,925 $13,451,907 $14,144,887
12.0% $10,573,883 $10,967,494 $11,400,466 $11,879,015 $12,410,735
12.4% $10,112,839 $10,470,785 $10,863,033 $11,294,759 $11,772,242
14.0% $8,717,819 $8,978,464 $9,260,829 $9,567,747 $9,902,567
15.0% $7,994,305 $8,210,710 $8,443,762 $8,695,458 $8,968,129

Regression Residual Growth:

WACC 1.0% 1.5% 2.0% 2.5% 3.0%
11.0% $6,489,090 $6,740,656 $7,020,174 $7,332,576 $7,684,028
12.0% $5,863,342 $6,062,967 $6,282,553 $6,525,254 $6,794,922
12.4% $5,625,430 $5,806,966 $6,005,898 $6,224,853 $6,467,014
14.0% $4,903,698 $5,035,887 $5,179,091 $5,334,748 $5,504,556
15.0% $4,528,025 $4,637,777 $4,755,972 $4,883,623 $5,021,911