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Table of Contents
Basic Exercise
Instructions
Exercise with Minimum
Exercise without Titles
File Name:
Description
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Exercise with Titles and Instructions
Summary of Key Points in Exercise
Include Minimum Cash Balance
Exercise with Only Inputs
C:\A Files\Courses\Course Materials\1 Templates and Exercises Corporate Mo
Colour Codes
Date
Note: Table of Contents Created with [Link] File
11-Mar-09
Author
Winston Churchill
Charles DeGaul
Pabblo Picasso
Michael Jackson
Nelson Mandella
terials\1 Templates and Exercises Corporate Model\Exercises\Exercise 2 - Simple Corporate [Link]
Table of Contents
Base Case
Verification
Show Comments
Year
Assumptions
Operating
EBITDA
Depreciation Rate
Capital Expenditures
200
10%
400
300
10%
400
400
10%
200
Financing
Interest Income Rate
Interest Expense Rate
Dividend Payout Ratio
3.00%
5.00%
50%
3.50%
5.50%
50%
4.00%
6.00%
50%
Long-Term Debt
Scheduled Repayment
Interest Rate on Long-term Debt
60
6.50%
60
6.50%
60
6.50%
Initial Balance Sheet
Cash
Plant Property and Equipment
Accumulated Depreciation
Total Assets
1,300.00
300.00
1,000.00
Long-Term Debt
Short-Term Debt
Equity
Total Liabilities and Capital
300.00
100.00
600.00
1,000.00
Fixed Assets
Plant Balance
Opening Balance
Add: Capital Expenditure
Closing Balance
1,300.00
1,300.00
400.00
1,700.00
1,700.00
400.00
2,100.00
2,100.00
200.00
2,300.00
Depreciation Rate
Depreciation Expense (Ending Balance)
10%
130.00
10%
170.00
10%
210.00
Accumulated Depreciation
Opening Balance
Add: Depreciation Expense
Closing Balance
300.00
130.00
430.00
430.00
170.00
600.00
600.00
210.00
810.00
300.00
240.00
180.00
Debt Analysis
Debt Balance
Opening Balance
300.00
Less: Repayments
Closing Balance
300.00
Interest Rate on Long-term Debt
Long-term Interest Expense
Cash LESS Short-term Debt Balance
Opening Balance
Add: Net Cash Flow
Closing Balance
Cash Balance
Interest Income Rate
Interest Income
Short-term Debt Balance
Interest Expense Rate
Short-term Interest Expense
(100.00)
-
100.00
Income Statement
EBITDA
Less: Depreciation
EBIT
Less: Short-term Interest
Less: Long-term Interest
Plus: Interest Income
Net Income
Cash Flow Statement
Net Income
Add: Depreciation Expense
Cash from Operations
Less: Capital Expenditures
Cash Before Financing
Less: Debt Repayment
Less: Dividends
Net Cash Flow
60.00
240.00
60.00
180.00
60.00
120.00
6.50%
19.50
6.50%
15.60
6.50%
11.70
(100.00)
(307.25)
(407.25)
(407.25)
(244.00)
(651.25)
(651.25)
19.61
(631.64)
3.00%
-
3.50%
-
4.00%
-
407.25
5.00%
5.00
651.25
5.50%
22.40
631.64
6.00%
39.07
200.00
130.00
70.00
5.00
19.50
0.00
45.50
300.00
170.00
130.00
22.40
15.60
0.00
92.00
400.00
210.00
190.00
39.07
11.70
0.00
139.23
45.50
130.00
175.50
400.00
(224.50)
60.00
22.75
(307.25)
92.00
170.00
262.00
400.00
(138.00)
60.00
46.00
(244.00)
139.23
210.00
349.23
200.00
149.23
60.00
69.61
19.61
622.75
92.00
46.00
668.75
668.75
139.23
69.61
738.36
0.00
2,100.00
0.00
2,300.00
Balance Sheet and Common Equity
Common Equity Balance
Openining Balance
Add: Net Income
Less: Dividends
Closing Balance
600.00
600.00
45.50
22.75
622.75
Assets
Cash
Plant Property and Equipment
0.00
1,300.00
0.00
1,700.00
Less: Accumulated Depreciation
Total Assets
Liabilites and Equity
Long-Term Debt
Short-Term Debt
Equity
Total Liabilities and Capital
Balance Sheet Difference
Balance Sheet Test
Aggregate Test
(300.00)
1,000.00
(430.00)
1,270.00
(600.00)
1,500.00
(810.00)
1,490.00
300.00
100.00
600.00
1,000.00
240.00
407.25
622.75
1,270.00
180.00
651.25
668.75
1,500.00
120.00
631.64
738.36
1,490.00
1.00
1.00
1.00
1.00
1.00
Show Comments
450
10%
50
450
10%
50
450
10%
50
450
10%
50
4.00%
6.00%
50%
4.00%
6.00%
50%
4.00%
6.00%
50%
4.00%
6.00%
50%
60
6.50%
60
6.50%
2,300.00
50.00
2,350.00
2,350.00
50.00
2,400.00
2,400.00
50.00
2,450.00
2,450.00
50.00
2,500.00
10%
230.00
10%
235.00
10%
240.00
10%
245.00
810.00
230.00
1,040.00
1,040.00
235.00
1,275.00
1,275.00
240.00
1,515.00
1,515.00
245.00
1,760.00
120.00
60.00
0.00
0.00
60.00
60.00
60.00
-
0.00
-
0.00
-
6.50%
7.80
6.50%
3.90
0.00%
0.00
0.00%
0.00
(631.64)
207.15
(424.49)
(424.49)
217.82
(206.67)
(206.67)
288.80
82.13
82.13
299.14
381.27
4.00%
-
4.00%
-
82.13
4.00%
-
381.27
4.00%
3.29
424.49
6.00%
37.90
206.67
6.00%
25.47
6.00%
12.40
6.00%
-
450.00
230.00
220.00
37.90
7.80
0.00
174.30
450.00
235.00
215.00
25.47
3.90
0.00
185.63
450.00
240.00
210.00
12.40
0.00
0.00
197.60
450.00
245.00
205.00
0.00
0.00
3.29
208.29
174.30
230.00
404.30
50.00
354.30
60.00
87.15
207.15
185.63
235.00
420.63
50.00
370.63
60.00
92.82
217.82
197.60
240.00
437.60
50.00
387.60
0.00
98.80
288.80
208.29
245.00
453.29
50.00
403.29
0.00
104.14
299.14
738.36
174.30
87.15
825.51
825.51
185.63
92.82
918.33
918.33
197.60
98.80
1,017.13
1,017.13
208.29
104.14
1,121.27
0.00
2,350.00
0.00
2,400.00
82.13
2,450.00
381.27
2,500.00
(1,040.00)
1,310.00
(1,275.00)
1,125.00
(1,515.00)
1,017.13
(1,760.00)
1,121.27
60.00
424.49
825.51
1,310.00
0.00
206.67
918.33
1,125.00
0.00
0.00
1,017.13
1,017.13
0.00
0.00
1,121.27
1,121.27
1.00
1.00
1.00
1.00
Table of Contents
Instructions
This model contains fundamental calculations for creating a financial model. Some of the key concepts
- Understand that the starting point for the model is the initial balance sheet
- Separate the model into modules with Separate parts for fixed assets and for debt
- The initial closing balance (in boxes) comes from the intial balance sheet
- Use accounts with opening and closing balance
- For the exercise, apply the positive number convention, meaning all of the numbers are positive
- Make the depreciation expense and the interest on the opening balance, meaning all flows occur at th
- Accounts in financial statements come from earlier modules or are sub-totals
- The only exception is to use the MAX(net income x payout ratio,0) for dividends
- Put the cash and short-term debt into a bucket and then split between debt and cash
- Split the bucket into cash or investments using the MAX function -- MAX(bucket,0) for cash
- Split the bucket into cash or investments using the MAX function -- MAX(-bucket,0) for debt
- Create a common equtiy balance account
- Link all of the balance sheet accouts
- Test the balance sheet
Other Notes:
- Set up the sheet with SHIFT, CNTL ---> and SHIFT,ALT,----->
- Use the combo box and the index command for scenarios
ome of the key concepts include:
umbers are positive
aning all flows occur at the end of the year
ket,0) for cash
cket,0) for debt
Table of Contents
Year
200
10%
400
300
10%
400
400
10%
200
Financing
Interest Income Rate
Interest Expense Rate
Minimum Cash Balance
Dividend Payout Ratio
3.00%
5.00%
100
50%
3.50%
5.50%
100
50%
4.00%
6.00%
100
50%
Long-Term Debt
Repayment
Interest Rate on Long-term Debt
60
6.50%
60
6.50%
60
6.50%
Assumptions
Operating
EBITDA Base Case
Depreciation Rate
Capital Expenditures
Initial Balance Sheet
Cash
Plant Property and Equipment
Accumulated Depreciation
Total Assets
100.00
1,300.00
300.00
1,100.00
Long-Term Debt
Short-Term Debt
Equity
Total Liabilities and Capital
300.00
200.00
600.00
1,100.00
450
10%
50
450
10%
50
450
10%
50
4.00%
6.00%
100
50%
4.00%
6.00%
100
50%
4.00%
6.00%
100
50%
60
6.50%
60
6.50%
Table of Contents
Base Case
Verification
Year
Show Comments
200
10%
400
2%
300
10%
400
2%
400
10%
200
2%
Financing
Interest Income Rate
Interest Expense Rate
Dividend Payout Ratio
3.00%
5.00%
50%
3.50%
5.50%
50%
4.00%
6.00%
50%
Long-Term Debt
Scheduled Repayment
Interest Rate on Long-term Debt
60
6.50%
60
6.50%
60
6.50%
Assumptions
Operating
EBITDA
Depreciation Rate
Capital Expenditures
Minimum Cash as Percent of EBITDA
Initial Balance Sheet
Cash
Plant Property and Equipment
Accumulated Depreciation
Total Assets
1,300.00
300.00
1,000.00
Long-Term Debt
Short-Term Debt
Equity
Total Liabilities and Capital
300.00
100.00
600.00
1,000.00
Fixed Assets
Plant Balance
Opening Balance
Add: Capital Expenditure
Closing Balance
1,300.00
1,300.00
400.00
1,700.00
1,700.00
400.00
2,100.00
2,100.00
200.00
2,300.00
Depreciation Rate
Depreciation Expense (Ending Balance)
10%
130.00
10%
170.00
10%
210.00
Accumulated Depreciation
Opening Balance
Add: Depreciation Expense
Closing Balance
300.00
130.00
430.00
430.00
170.00
600.00
600.00
210.00
810.00
Debt Analysis
Debt Balance
300.00
Opening Balance
Less: Repayments
Closing Balance
300.00
Interest Rate on Long-term Debt
Long-term Interest Expense
Cash LESS Short-term Debt Balance
Opening Balance
Add: Net Cash Flow
Closing Balance
(100.00)
Minimum Cash Balance
EBITDA
Cash Balance Percent
Cash Balance Amount
Cash Balance
Interest Income Rate
Interest Income
Short-term Debt Balance
Interest Expense Rate
Short-term Interest Expense
Income Statement
EBITDA
Less: Depreciation
EBIT
Less: Short-term Interest
Less: Long-term Interest
Plus: Interest Income
Net Income
Cash Flow Statement
Net Income
Add: Depreciation Expense
Cash from Operations
Less: Capital Expenditures
Cash Before Financing
Less: Debt Repayment
Less: Dividends
Net Cash Flow
Balance Sheet and Common Equity
Common Equity Balance
Openining Balance
Add: Net Income
100.00
300.00
-60.00
240.00
240.00
-60.00
180.00
180.00
-60.00
120.00
6.50%
19.50
6.50%
15.60
6.50%
11.70
(100.00)
(307.25)
(407.25)
(407.25)
(244.04)
(651.29)
(651.29)
19.55
(631.74)
200.00
0.02
4.00
300.00
0.02
6.00
400.00
0.02
8.00
4.00
3.00%
-
6.00
3.50%
0.14
8.00
4.00%
0.24
411.25
5.00%
5.00
657.29
5.50%
22.62
639.74
6.00%
39.44
200.00
130.00
70.00
5.00
19.50
0.00
45.50
300.00
170.00
130.00
22.62
15.60
0.14
91.92
400.00
210.00
190.00
39.44
11.70
0.24
139.10
45.50
130.00
175.50
400.00
(224.50)
(60.00)
(22.75)
(307.25)
91.92
170.00
261.92
400.00
(138.08)
(60.00)
(45.96)
(244.04)
139.10
210.00
349.10
200.00
149.10
(60.00)
(69.55)
19.55
600.00
45.50
622.75
91.92
668.71
139.10
Less: Dividends
Closing Balance
600.00
(22.75)
622.75
(45.96)
668.71
(69.55)
738.26
Assets
Cash
Plant Property and Equipment
Less: Accumulated Depreciation
Total Assets
0.00
1,300.00
(300.00)
1,000.00
4.00
1,700.00
(430.00)
1,274.00
6.00
2,100.00
(600.00)
1,506.00
8.00
2,300.00
(810.00)
1,498.00
Liabilites and Equity
Long-Term Debt
Short-Term Debt
Equity
Total Liabilities and Capital
300.00
100.00
600.00
1,000.00
240.00
411.25
622.75
1,274.00
180.00
657.29
668.71
1,506.00
120.00
639.74
738.26
1,498.00
1.00
1.00
1.00
1.00
1.00
Balance Sheet Difference
Balance Sheet Test
Aggregate Test
Show Comments
450
10%
50
2%
450
10%
50
2%
450
10%
50
2%
450
10%
50
2%
4.00%
6.00%
50%
4.00%
6.00%
50%
4.00%
6.00%
50%
4.00%
6.00%
50%
60
6.50%
60
6.50%
2,300.00
50.00
2,350.00
2,350.00
50.00
2,400.00
2,400.00
50.00
2,450.00
2,450.00
50.00
2,500.00
10%
230.00
10%
235.00
10%
240.00
10%
245.00
810.00
230.00
1,040.00
1,040.00
235.00
1,275.00
1,275.00
240.00
1,515.00
1,515.00
245.00
1,760.00
120.00
-60.00
60.00
60.00
-60.00
-
0.00
0.00
-
0.00
0.00
-
6.50%
7.80
6.50%
3.90
0.00%
0.00
0.00%
0.00
(631.74)
207.07
(424.67)
(424.67)
217.72
(206.95)
(206.95)
288.70
81.75
81.75
299.14
380.89
450.00
0.02
9.00
450.00
0.02
9.00
450.00
0.02
9.00
450.00
0.02
9.00
9.00
4.00%
0.32
9.00
4.00%
0.36
81.75
4.00%
0.36
380.89
4.00%
3.27
433.67
6.00%
38.38
215.95
6.00%
26.02
6.00%
12.96
6.00%
-
450.00
230.00
220.00
38.38
7.80
0.32
174.14
450.00
235.00
215.00
26.02
3.90
0.36
185.44
450.00
240.00
210.00
12.96
0.00
0.36
197.40
450.00
245.00
205.00
0.00
0.00
3.27
208.27
174.14
230.00
404.14
50.00
354.14
(60.00)
(87.07)
207.07
185.44
235.00
420.44
50.00
370.44
(60.00)
(92.72)
217.72
197.40
240.00
437.40
50.00
387.40
0.00
(98.70)
288.70
208.27
245.00
453.27
50.00
403.27
0.00
(104.14)
299.14
738.26
174.14
825.33
185.44
918.05
197.40
1,016.75
208.27
(87.07)
825.33
(92.72)
918.05
(98.70)
1,016.75
(104.14)
1,120.89
9.00
2,350.00
(1,040.00)
1,319.00
9.00
2,400.00
(1,275.00)
1,134.00
81.75
2,450.00
(1,515.00)
1,016.75
380.89
2,500.00
(1,760.00)
1,120.89
60.00
433.67
825.33
1,319.00
0.00
215.95
918.05
1,134.00
0.00
0.00
1,016.75
1,016.75
0.00
0.00
1,120.89
1,120.89
1.00
1.00
1.00
1.00
