RETURN ON

CAPITAL
EMPLOYEED
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Sum
Total assets 10 12 15 165 1803 1959. 2118.2 2280. 2446. 2615. 2787. 2963. 3142. 3325. 3325. 3325.
00 50 00 0 06 412 606 218 143 445 194 458 307 307 307
Depreciation 165 180. 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5
- 3
Investment 280 62.7 65.1 67.6 70.1 72.7 75.4 78.2 81.1 84.0 87.0 20.5 20.9
in WC + .0
Ending BV 10 12 15 176 1685 1828. 1974.0 2122. 2274. 2429. 2586. 2747. 2912. 3179. 3138. 3163.
00 50 00 5 .4 3 7 3 1 9 9 2 8 3 7 35,5
57
Average BV 10 12 15 176 1685 1828 1974 2123 2274 2429 2587 2748 2912 3180 3138 3164
00 50 00 5
EAT 30. 69.8 110.8 153.6 198.2 244.6 293.0 343.3 395.7 450.2 566.9 596.0 625.4
5 4,07
8
ROCE 0.11
5

SIDE
BENEFITS
EAT 8.5 8.7 8.9 9.0 9.2 9.4 9.6 9.8 10.0 10.2 10.4 10.6 10.8 125.
0
Add. 14. 14.5 14.8 15.1 15.4 15.7 16.0 16.3 16.6 17.0 17.3 17.6 18.0 208.
Operating 2 4
income
ROCE 0.6
ROCE is greater than WACC, so
company should invest in this project
INCREMENTAL Finite Life
CASHFLOW
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Total Revenue 200 2448 2913.1 3395.8 3896.7 4416.3 4955.1 5513.6 6092.6 6692.5 7313.9 7460.2 7609.4
0 2 656 56 23 15 91 29 18 67 46 51
COGS 160 1958 2330.4 2716.6 3117.4 3533.0 3964.0 4410.9 4874.1 5354.0 5851.1 5968.1 6087.5
0 .4 96 925 05 59 92 53 03 15 73 97 61
Gross Profit 400 489. 582.62 679.17 779.35 883.26 991.02 1102.7 1218.5 1338.5 1462.7 1492.0 1521.8
Margin 6 4 312 12 46 29 38 26 04 93 49 9
Expenses

Depreciation 165. 180. 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5
0 3
G & A Expense 25.0 30.6 36.4 42.4 48.7 55.2 61.9 68.9 76.2 83.7 91.4 93.3 95.1

Add. 159. 162. 165.6 168.9 172.3 175.7 179.3 182.8 186.5 190.2 194.0 197.9 201.9
Advertisment 2 4

EBIT 50.8 116. 184.7 256.0 330.3 407.7 488.3 572.2 659.5 750.4 944.8 993.3 1042.4
3
Taxes ( 40 % ) 20.3 46.5 73.9 102.4 132.1 163.1 195.3 228.9 263.8 300.1 377.9 397.3 416.9

EAT + 30.5 69.8 110.8 153.6 198.2 244.6 293.0 343.3 395.7 450.2 566.9 596.0 625.4

Depreciation + 165. 180. 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5
0 3
Capital 100 250 250 150 153 156.1 159.2 162.4 165.6 168.9 172.3 175.7 179.3 182.8
Expenditure - 0
Opp Cost Dist. 552
System -
Change in W.C 280 62.7 65.1 67.6 70.1 72.7 75.4 78.2 81.1 84.0 87.0 20.5 20.9
-
Salvage Value 1548

Casflow to the - - - - 32.0 -468.9 136.1 191.1 248.2 307.4 368.7 432.3 498.2 596.1 782.6 2355.9
Firm 100 250 530 17.2
0
PVF @ 7.32% 0.9 0.8 0.8 0.75 0.70 0.655 0.610 0.568 0.530 0.493 0.460 0.428 0.399 0.372 0.347 0.323
32 68 09 4 2
PVCF @ 7.32% - - - - 22.5 -306.9 83.0 108.6 131.4 151.7 169.5 185.2 198.9 221.7 271.2 760.8
931 217 428 13.0
.8 .1 .8
NPV 407

Side Effect

Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Loss EBIT on close -50 -50 -50 -50 -50 -50 -50 -50 -50 -50
store
Add. Revenue 100 102 104.0 106.1 108.2 110.4 112.6 114.9 117.2 119.5 121.9 124.3 126.8

Add. Operating 14.2 14.5 14.8 15.1 15.4 15.7 16.0 16.3 16.6 17.0 17.3 17.6 18.0
income
EAT 8.5 8.7 8.9 9.0 9.2 9.4 9.6 9.8 10.0 10.2 10.4 10.6 10.8

Operating income 0 -50 -50 72.7 75.2 77.7 80.2 82.8 85.5 88.2 91.0 143.8 146.7 149.6 152.6 155.6
net flow
PVF @ 7.32% 0.932 0.868 0.809 0.754 0.702 0.655 0.610 0.568 0.530 0.493 0.460 0.428 0.399 0.372 0.347 0.323

PVCF @ 7.32% 0.0 0.0 -40.5 54.8 52.8 50.8 48.9 47.1 45.3 43.5 41.8 61.6 58.5 55.6 52.9 50.3

NPV 623.5

Overall NPV 1030.4

NPV is Positive, so company invest in the

project
INCREMENTAL IN-Finite
CASHFLOW Life

Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Total 20 244 2913. 3395.8 3896. 4416. 4955. 5513. 6092. 6692. 7313. 7460. 7609.
Revenue 00 8 12 656 756 323 115 691 629 518 967 246 451
COGS 16 195 2330. 2716.6 3117. 3533. 3964. 4410. 4874. 5354. 5851. 5968. 6087.
00 8.4 496 925 405 059 092 953 103 015 173 197 561
Gross Profit 40 489 582.6 679.17 779.3 883.2 991.0 1102. 1218. 1338. 1462. 1492. 1521.
Margin 0 .6 24 312 512 646 229 738 526 504 793 049 89
Expenses
Depreciatio 16 180. 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5
n 5.0 3
G&A 25. 30.6 36.4 42.4 48.7 55.2 61.9 68.9 76.2 83.7 91.4 93.3 95.1
Expense 0
Add. 15 162. 165.6 168.9 172.3 175.7 179.3 182.8 186.5 190.2 194.0 197.9 201.9
Advertisme 9.2 4
nt
Dep: Cap 15.0 31.0 46.0 67.0 87.0 108.0 127.0 147.0 166.0 186.0 183.0 179.0
maintaince
EBIT 50. 101. 153.7 210.0 263.3 320.7 380.3 445.2 512.5 584.4 758.8 810.3 863.4
8 3
Taxes ( 40 20. 40.5 61.5 84.0 105.3 128.3 152.1 178.1 205.0 233.7 303.5 324.1 345.3
%) 3
EAT + 30. 60. 92.2 126.0 158.0 192.4 228.2 267.1 307.5 350.6 455.3 486.2 518.0
5 8
Depreciatio 16 180. 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5
n+ 5.0 3
Capital 100 25 25 15 153 156.1 159.2 162.4 165.6 168.9 172.3 175.7 179.3 182.8
Expenditur 0 0 0 0
e-
Capital 156. 159.2 162.4 165.6 168.9 172.3 175.7 179.3 182.8 186.5 159 154
Maintence 1
Opp Cost 552
Dist.
System -
Change in 28 62. 65.1 67.6 70.1 72.7 75.4 78.2 81.1 84.0 87.0 20.5 20.9 21.0
W.C - 0 7
Terminal 6788.
Value 1
Cashflow - - - - - - -53.9 -14.7 27.1 70.3 116.8 164.8 215.7 298.0 513.8 525.5
100 25 53 17. 133. 646.7
0 0 0 2 1
PVF @ 0.93 0.8 0.8 0.7 0.70 0.655 0.610 0.568 0.530 0.493 0.460 0.428 0.399 0.372 0.347 0.323
7.32% 2 68 09 54 2
PVCF - - - -13 -93 -423 -33 -8 14 35 54 71 86 111 178 170
932 21 42
7 9
NPV -
143
1
Side Effect
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Loss EBIT -50 -50 -50 -50 -50 -50 -50 -50 -50 -50
on close
store
Add. 10 102 104.0 106.1 108.2 110.4 112.6 114.9 117.2 119.5 121.9 124.3 126.8
Revenue 0
Add. 14. 14.5 14.8 15.1 15.4 15.7 16.0 16.3 16.6 17.0 17.3 17.6 18.0
Operating 2
income
EAT 8.5 8.7 8.9 9.0 9.2 9.4 9.6 9.8 10.0 10.2 10.4 10.6 10.8
Operating 0 -50 -50 72. 75.2 77.7 80.2 82.8 85.5 88.2 91.0 143.8 146.7 149.6 152.6 155.6
income net 7
flow
PVF @ 0.93 0.8 0.8 0.7 0.70 0.655 0.610 0.568 0.530 0.493 0.460 0.428 0.399 0.372 0.347 0.323
7.32% 2 68 09 54 2
PVCF @ 0.0 0.0 - 54. 52. 50.8 48.9 47.1 45.3 43.5 41.8 61.6 58.5 55.6 52.9 50.3
7.32% 40. 8 8
5
NPV 623
.5
Overall -
Project 807
NPV .03
WORKINGS
1

Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Capital 100 250 250 150 153 156.1 159.2 162.4 165.6 168.9 172.3 175.7 179.3 182.8
Expenditure 0
Total assets 100 125 1500 1650 1803 1959. 2118.2 2280. 2446. 2615. 2787. 2963. 3142. 3325. 3325. 3325.
0 0 1 6 2 1 4 2 5 3 3 3
Depreciation 165 180.3 195.9 211.8 228.1 244.6 261.5 278.7 296.3 314.2 232.5 207.5 182.5

2
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
No. of Stores 50 60 70 80 90 100 110 120 130 140 150 150 150
Revenue per 40 40.8 41.6 42.4 43.3 44.2 45.0 45.9 46.9 47.8 48.8 49.7 50.7
store
Total 2000 2448. 2913. 3395.9 3896. 4416. 4955. 5513. 6092. 6692. 7314. 7460. 7609.
Revenue 0 1 8 3 1 7 6 5 0 2 5
COGS 1600 1958. 2330. 2716.7 3117. 3533. 3964. 4411. 4874. 5354. 5851. 5968. 6087.
4 5 4 1 1 0 1 0 2 2 6

3
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Grwoth Rate 1.224 1.19 1.1657 1.147 1.133 1.122 1.112 1.105 1.098 1.092 1.02 1.02
143 5 333 727 462 857
G&A 25 30.6 36.41 42.45 48.71 55.20 61.94 68.92 76.16 83.66 91.42 93.25 95.12
Expenses
 4
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Adv. 100 102 1040. 1061.2 1082. 1104. 1126.1 1148. 1171. 1195. 1218. 1243. 1268. 1293. 1319. 1345.
Without 0 0 4 08 432 081 624 686 659 093 994 374 242 607 479 868
Furnit.
Add. 159.18 162.3 165.6 168.92 172.3 175.7 179.2 182.8 186.5 190.2 194.0 197.9 201.8
Advertismen 12 648 121 436 029 489 639 492 061 363 41 218 803
t

5
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
A/R 200 244.8 291.3 339.58 389.6 441.6 495.5 551.3 609.2 669.2 731.3 746.0 760.9
12 656 756 323 115 691 629 518 967 246 451
Inventory 160 195.8 233.0 271.66 311.7 353.3 396.4 441.0 487.4 535.4 585.1 596.8 608.7
4 496 925 405 059 092 953 103 015 173 197 561
A/P 80 97.92 116.5 135.83 155.8 176.6 198.2 220.5 243.7 267.7 292.5 298.4 304.3
248 462 702 529 046 476 052 007 587 098 78
Working 280 342.7 407.8 475.42 545.5 618.2 693.7 771.9 852.9 936.9 1023. 1044. 1065.
Capital 2 368 118 458 852 161 168 68 526 955 434 323
Change in 280 62.7 65.1 67.6 70.1 72.7 75.4 78.2 81.1 84.0 87.0 20.5 20.9
WC

6
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Capcaity 0.55 0.57 0.606 0.6366 0.668 0.701 0.7370 0.773 0.812 0.853 0.895 0.940 0.987 1.037 1.088 1.143
Used by 75 375 938 528 955 526 905 6 231 892 687 721 107 962 41
building
Surplus 0.45 0.42 0.393 0.3633 0.331 0.298
Capacity 25 625 063 472 045
Capcaity Used by 0.2 0.244 0.291 0.3395 0.389 0.441 0.495 0.551 0.609 0.669 0.731 0.746 0.760
Furniture 8 312 866 676 632 511 369 263 252 397 025 945
Capital 552.0
Expenditure
Depreciation 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2 55.2

7
Years 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Add. 100 102 104.0 106.1 108.2 110.4 112.6 114.9 117.2 119.5 121.9 124.3 126.8
Revenue
Add. 14.2 14.5 14.8 15.1 15.4 15.7 16.0 16.3 16.6 17.0 17.3 17.6 18.0
Cashflow

WACC Operating Lease

8
PV of Operating Lease
w1 0.86 922 826.6 743.3 629.40 533.3 3361. 7016.
667 432 942 978 682 499
w2 0.14 Equity 17690
0
Ke 0.08 Debt 27986
.5
Kd 0.04
t 0.4 Ke 0.081 WACC 0.073 7.32%
2

Stor W Rm-Rf w*(Rm-Rf)

es
US 90 0.60 0.056 0.0341
9
Westren 20 0.13 0.068 0.0091
Europe 1
Asia 30 0.20 0.071 0.0142
2
Latin 10 0.07 0.102 0.0068
America 1
Total 150 0.0643

Company Beta Debt Equity Beta

Name L UL
Mohawk 1.18 251 16690 1.026
 1.5 .9
leggett 1.1 959. 6552. 0.959
8 1
Tempur 1.39 188 2529. 0.796
8.1 1
La-Z Boy 1.34 0.59 1386. 1.339
4
Ethan 1.28 40.3 797.5 1.218
Flexsteel 1.82 0 412.7 1.820
Hooker 0.86 49 383.6 0.763
Furniture
Bassett 1.23 7.11 293.8 1.201
Fruniture
The Dixie 1.18 122. 54.1 0.362
1
Nova 0.99 8.03 48.2 0.849
Lifestyle
Live Venture 1.49 75.5 33.1 0.454
Stanley 1.32 0 11.9 1.320
Furniture
1.009

Beta 0.87
L 1