Private Companies (Very Small Businesses) - Key Differences

1) Financial Statement Adjustments - May have to change the presentation of the financial statements to make them m

Properly classify "Dividends" or "Owner Draws" and consider them an IS expense if you're marketing this company for a

Remove intermingled personal expenses.

Make the tax rate in future periods in-line with the potential buyer's rate to properly reflect future of the business.

2) Public Comps and Precedent Transactions - You still select the same types of companies and transactions (same indu
size if you can find any like that, match the geography / customer base, etc.).

BUT you'll almost certainly have to apply a "private company discount" or "liquidity / illiquidity discount" to the multip
comps but also sometimes from the transactions depending on what they look like (e.g., if they're all for much bigger co

Might range from 10-30% depending on the size/scale of the private company, and who the potential buyer is. Don't app
because the company is about to go public anyway.

3) DCF Analysis - Still project FCF in the same way, and over the same type of time period (5-10+ years). Financial statem
adjusted when you do this.

Cost of Equity and WACC - In practice, you'll still un-lever Beta from the comps and re-lever based on the comps' median
"optimal" capital structure.
Private companies don't have current market caps, so need to use this targeted structure instead.

May use "Total Beta" and divide Unlevered Beta by R, the square root of the "Market Correlation" factor; may further ad
overall portfolio diversification.

Discount Rate will pretty much always be higher for a private company since they're less liquid and since the potential bu
private, which means less diversification and more risk.

Terminal Value - Can still calculate by using the Multiples or Gordon Growth Method, but you need to apply some type o
to the nature of very small businesses.

Or, calculate using the company's Liquidation Value, or just assume that there is no Terminal Value because the company
future (and project FCF out until this happens).

4) Valuation Summary - Stop at Implied Equity Value or Implied Enterprise Value since share price is not relevant for priv

PrivCo / Illiquidity or Liquidity Discount:

Should almost always apply it to multiples from public comps since those companies, being public, are all a lot more liqu
comps; tend not to apply it in a DCF analysis since the Discount Rate is higher and the Terminal Value is already lower, w
Valuation is highly dependent on the buyer; tends to be lowest for other private companies or individuals, higher for larg
with broad shareholder bases, and sometimes even higher in IPO scenarios because no discount is applied to the comps
Terminal Value in a DCF don't need to be adjusted.
al statements to make them more in-line with GAAP or IFRS.

e marketing this company for a sale.

ct future of the business.

es and transactions (same industry, ideally close to the same

quidity discount" to the multiples, certainly from the public

f they're all for much bigger companies).

he potential buyer is. Don't apply this in an IPO scenario

(5-10+ years). Financial statements should already have been

er based on the comps' median capital structure or

relation" factor; may further adjust by the potential buyer's

quid and since the potential buyers themselves are often

you need to apply some type of "Going Concern" discount due

nal Value because the company ceases operations in the

are price is not relevant for private companies.

ng public, are all a lot more liquid; sometimes apply it to M&A

minal Value is already lower, which reflect the PrivCo status.
es or individuals, higher for large, diversified public companies
scount is applied to the comps then, and Discount Rate and
Sample Private Company Financial Statements - Capital Capable Media LLC:
($ USD as Stated)

Historical
Revenue and Expense Drivers: Units Year 1 Year 2

Course Sign-Ups: # Customers 1,011 2,051

Average Customer Value: $ / Customer $ 107.24 $ 128.31

Revenue Growth Rates:

Product Sales Referred by Affiliates: % N/A 30.3%
Coaching & Resume Editing Services: % N/A 23.2%
Sales to Institutions: % N/A 138.1%
Commissions from Other Products: % N/A 27.0%

Expense Percentages:
Commission Rate - Affiliates: % 50.0% 50.0%
Commission Rate - Coaches: % 50.0% 50.0%
Commission Rate - Sales Reps: % 0.0% 40.0%

Payment Fees % Gross Sales: % 2.9% 2.8%

Refunds % Gross Sales: % 3.0% 3.1%

Tax & Legal Fees % Gross Sales: % 0.6% 0.4%

Online Advertising % Gross Sales: % 0.0% 2.5%
IT Infrastructure % Gross Sales: % 0.9% 1.2%
Travel & Moving % Gross Sales: % 2.7% 2.2%
Depr. & Amort. % Gross Sales: % 0.3% 0.2%

Effective Tax Rate: % 25.0% 27.0%

Full-Time Equivalents (FTEs):

Customer Support: # FTEs 0.00 0.00
Web Design & Development: # FTEs 0.00 0.50
Sales Reps: # FTEs 0.00 0.50
Marketing Staff: # FTEs 0.00 0.00
Product Creation: # FTEs 0.00 0.00
Content Creation: # FTEs 0.00 0.00
Total FTEs: 0.00 1.00

Average Expense per FTE:

Customer Support: $ / FTE N/A N/A
Web Design & Development: $ / FTE N/A 60,000
Sales Reps: $ / FTE N/A 20,000
 Marketing Staff: $ / FTE N/A N/A
Product Creation: $ / FTE N/A N/A
Content Creation: $ / FTE N/A N/A

Salary Growth Rate: %

Historical
BS and CFS Drivers: Units Year 1 Year 2

Accounts Receivable % Gross Sales: % 0.0% 0.5%

Accounts Payable % OpEx: % 0.5% 0.9%
Accrued Expenses % OpEx: % 1.0% 1.0%
Deferred Revenue % Gross Sales: % 0.0% 0.2%

CapEx % Revenue: % 0.4% 0.5%

Sales / (Purchases) of Other Assets: $ (127) (254)

Change in Other Non-Current Liabilities: $ 53 102

Owner Draw % Gross Sales: $ 37.6% 24.7%

Dividends / Owner Draw: $ 80,000 100,000

Owner Draw - G&A Allocation: % 25.0% 20.0%

Owner Draw - S&M Allocation: % 50.0% 50.0%
Owner Draw - R&D Allocation: % 25.0% 30.0%

Owner Draw - G&A Allocation: $ 20,000 20,000

Owner Draw - S&M Allocation: $ 40,000 50,000
Owner Draw - R&D Allocation: $ 20,000 30,000
 Historical
Income Statement: Units Year 1 Year 2
Gross Sales by Category:
Online Courses: $ $ 108,419 $ 263,157
Product Sales Referred by Affiliates: $ 40,392 52,631
Coaching & Resume Editing Services: $ 36,140 44,534
Sales to Institutions: $ 8,503 20,243
Commissions from Other Products: $ 19,133 24,291
Total Gross Sales: $ 212,587 404,857

Commissions by Category:
Commissions Paid to Affiliates: $ 20,196 26,316
Commissions Paid to Coaches: $ 18,070 22,267
Commissions Paid to Sales Reps: $ - 8,097
Total Commissions: $ 38,266 56,680

Gross Sales Less Commissions: $ 174,321 348,177

Fees & Refunds:

Payment Fees: $ 6,165 11,336
Refunds: $ 6,378 12,551
Total Fees & Refunds: $ 12,543 23,887

Net Sales After Fees and Refunds: $ 161,779 324,290

Operating Expenses:
Tax, Bookkeeping & Legal Fees: $ 1,250 1,500
Customer Support: $ - 30,000
Online Advertising: $ - 10,000
Web Design & Development: $ 10,000 30,000
Sales Reps - Base Salaries: $ - 10,000
Marketing Staff: $ - -
IT Infrastructure: $ 2,000 5,000
Travel & Moving Expenses: $ 5,768 8,798
Depreciation & Amortization: $ 568 792
Product Creation: $ - -
Content Creation: $ - -
Total Operating Expenses: $ 19,586 96,090

Operating Income: $ 142,193 228,200

Income Taxes: $ 35,548 61,614

Net Income: $ $ 106,645 $ 166,586

 Historical
Key Metrics and Ratios: Units Year 1 Year 2

EBITDA Calculation:
Operating Income: $ $ 142,193 $ 228,200
Plus: Depreciation & Amortization: $ 568 792
EBITDA: $ 142,761 228,992

Revenue Growth: % N/A 90.4%

Operating Margin: % 66.9% 56.4%
EBITDA Margin: % 67.2% 56.6%
Net Margin: % 50.2% 41.1%

Effective Tax Rate: % 25.0% 27.0%

 Historical
Balance Sheet: Units Year 1 Year 2
Assets:
Current Assets:
Cash & Cash Equivalents: $ $ 52,348 $ 117,867
Accounts Receivable: $ - 2,024
Total Current Assets: $ 52,348 119,892

Long-Term Assets:
Plants, Property & Equipment: $ 10,038 11,270
Other Assets: $ 127 381
Total Long-Term Assets: $ 10,165 11,651

Total Assets: $ $ 62,513 $ 131,543

Liabilities & Equity:

Current Liabilities:
Accounts Payable: $ 98 865
Accrued Expenses: $ 196 961
Total Current Liabilities: $ 294 1,826

Long-Term Liabilities:
Deferred Revenue: $ - 810
Other Non-Current Liabilities: $ 53 155
Total Long-Term Liabilities: $ 53 965

Total Liabilities: $ $ 347 $ 2,790

Equity: $ $ 62,166 $ 128,753

TOTAL LIABILITIES & EQUITY: $ $ 62,513 $ 131,543

Balance Sheet Check: OK! OK!

 Historical
Cash Flow Statement: Units Year 1 Year 2

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income: $ $ 106,645 $ 166,586
Plus: Depreciation & Amortization: $ 568 792
Change in Accounts Receivable: $ - (2,024)
Change in Accounts Payable: $ 98 767
Change in Accrued Expenses: $ 196 765
Change in Deferred Revenue: $ - 810
Cash Flow from Operations: $ 107,506 167,696

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital Expenditures (CapEx): $ (850) (2,024)
Sales / (Purchases) of Other Assets: $ (127) (254)
Cash Flow from Investing: $ (977) (2,278)

CASH FLOW FROM FINANCING ACTIVITIES:

Change in Other Non-Current Liabilities: $ 53 102
Dividends / Owner Draw: $ (80,000) (100,000)
Cash Flow from Financing: $ (79,947) (99,898)

Net Change in Cash: $ 26,582 65,519

Beginning Cash Balance: $ 25,766 52,348
Ending Cash Balance: $ $ 52,348 $ 117,867
 Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

2,978 4,000 4,500 4,800 5,200 5,600

$ 145.64 $ 145.76 $ 163.26 $ 175.00 $ 190.00 $ 210.00

16.1% (38.0%) 26.0% 25.0% 20.0% 15.0%

23.5% 10.2% 10.3% 10.0% 10.0% 8.0%
50.9% 73.5% 44.0% 40.0% 35.0% 30.0%
25.7% (25.6%) 26.0% 15.0% 10.0% 10.0%

50.0% 50.0% 50.0% 50.0% 50.0% 50.0%

50.0% 50.0% 50.0% 50.0% 50.0% 50.0%
40.0% 40.0% 40.0% 40.0% 40.0% 40.0%

2.8% 2.8% 2.8% 2.8% 2.8% 2.9%

3.5% 4.0% 4.1% 4.5% 4.5% 5.0%

0.2% 0.3% 0.2% 0.2% 0.2% 0.3%

3.3% 2.6% 3.1% 3.1% 3.3% 3.5%
1.6% 2.0% 2.1% 2.2% 2.4% 2.4%
1.0% 0.7% 0.7% 0.7% 0.6% 0.5%
0.2% 0.2% 0.2% 0.2% 0.2% 0.3%

28.0% 29.0% 30.0% 30.0% 30.0% 30.0%

0.50 0.75 1.00 1.00 1.50 1.50

1.00 1.00 1.00 1.50 1.50 2.00
0.50 0.50 0.50 0.50 1.00 1.00
0.50 0.75 1.00 1.00 1.00 1.00
0.50 0.50 1.00 1.00 1.00 2.00
0.50 0.50 0.50 0.50 0.75 0.75
3.50 4.00 5.00 5.50 6.75 8.25

$ 60,000 $ 60,000 $ 60,000 $ 62,400 $ 64,896 $ 67,492

60,000 60,000 60,000 62,400 64,896 67,492
24,000 24,000 24,000 24,960 25,958 26,997
 80,000 80,000 80,000 83,200 86,528 89,989
80,000 80,000 80,000 83,200 86,528 89,989
60,000 60,000 60,000 62,400 64,896 67,492

4.0% 4.0% 4.0%

Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

1.0% 1.0% 1.2% 1.2% 1.3% 1.4%

1.3% 1.8% 2.1% 2.2% 2.4% 2.4%
1.5% 1.5% 1.5% 1.7% 1.7% 1.9%
0.5% 0.8% 1.0% 1.2% 1.4% 1.5%

0.5% 0.5% 0.6% 0.6% 0.7% 0.7%

(321) (423) (501) (500) (600) (750)

1,211 2,310 3,123 3,500 3,800 4,100

19.6% 19.8% 21.0% 20.0% 20.0% 20.0%

120,000 150,000 200,000 222,576 264,169 314,589

15.0% 10.0% 10.0% 5.0% 5.0% 5.0%

50.0% 55.0% 55.0% 60.0% 65.0% 65.0%
35.0% 35.0% 35.0% 35.0% 30.0% 30.0%

18,000 15,000 20,000 11,129 13,208 15,729

60,000 82,500 110,000 133,546 171,710 204,483
42,000 52,500 70,000 77,902 79,251 94,377
 Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

$ 433,718 $ 583,030 $ 734,675 $ 840,000 $ 988,000 $ 1,176,000

61,087 37,859 47,706 59,633 71,559 82,293
54,978 60,575 66,789 73,467 80,814 87,279
30,544 53,003 76,330 106,862 144,263 187,542
30,544 22,715 28,624 32,917 36,209 39,830
610,871 757,182 954,123 1,112,879 1,320,846 1,572,945

30,544 18,930 23,853 29,816 35,780 41,147

27,489 30,287 33,394 36,734 40,407 43,640
12,217 21,201 30,532 42,745 57,705 75,017
70,250 70,418 87,779 109,295 133,892 159,803

540,621 686,764 866,344 1,003,584 1,186,954 1,413,142

17,104 21,201 26,715 31,161 36,984 45,615

21,380 30,287 39,119 50,080 59,438 78,647
38,485 51,488 65,834 81,240 96,422 124,263

502,136 635,276 800,509 922,344 1,090,532 1,288,879

1,500 2,000 2,250 2,226 2,642 4,719

30,000 45,000 60,000 62,400 97,344 101,238
20,000 20,000 30,000 34,499 43,588 55,053
60,000 60,000 60,000 93,600 97,344 134,984
12,000 12,000 12,000 12,480 25,958 26,997
40,000 60,000 80,000 83,200 86,528 89,989
10,000 15,000 20,000 24,483 31,700 37,751
6,012 5,123 6,763 7,790 7,925 7,865
1,011 1,523 2,024 2,226 2,642 4,719
40,000 40,000 80,000 83,200 86,528 179,978
30,000 30,000 30,000 31,200 48,672 50,619
250,523 290,646 383,037 437,304 530,871 693,911

251,613 344,630 417,472 485,040 559,661 594,968

70,452 99,943 125,242 145,512 167,898 178,491

$ 181,161 $ 244,687 $ 292,231 $ 339,528 $ 391,763 $ 416,478

 Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

$ 251,613 $ 344,630 $ 417,472 $ 485,040 $ 559,661 $ 594,968

1,011 1,523 2,024 2,226 2,642 4,719
252,624 346,153 419,496 487,266 562,303 599,687

50.9% 24.0% 26.0% 16.6% 18.7% 19.1%

41.2% 45.5% 43.8% 43.6% 42.4% 37.8%
41.4% 45.7% 44.0% 43.8% 42.6% 38.1%
29.7% 32.3% 30.6% 30.5% 29.7% 26.5%

28.0% 29.0% 30.0% 30.0% 30.0% 30.0%

 Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

$ 181,225 $ 279,274 $ 374,608 $ 495,283 $ 625,504 $ 732,775

6,109 7,572 11,449 13,355 17,171 22,021
187,333 286,846 386,058 $ 508,637 $ 642,675 $ 754,797

13,314 15,577 19,277 23,729 30,333 36,625

702 1,125 1,626 2,126 2,726 3,476
14,016 16,702 20,903 25,855 33,059 40,101

$ 201,349 $ 303,547 $ 406,961 $ 534,492 $ 675,734 $ 794,897

3,257 5,232 8,044 9,621 12,741 16,654

3,758 4,360 5,746 7,434 9,025 13,184
7,015 9,591 13,789 17,055 21,766 29,838

3,054 5,679 9,541 13,355 18,492 23,594

1,366 3,676 6,799 10,299 14,099 18,199
4,420 9,355 16,340 23,654 32,591 41,793

$ 11,435 $ 18,946 $ 30,130 $ 40,708 $ 54,357 $ 71,631

$ 189,914 $ 284,601 $ 376,831 $ 493,784 $ 621,377 $ 723,266

$ 201,349 $ 303,547 $ 406,961 $ 534,492 $ 675,734 $ 794,897

OK! OK! OK! OK! OK! OK!

 Historical Projected
Year 3 Year 4 Year 5 Year 6 Year 7 Year 8

$ 181,161 $ 244,687 $ 292,231 $ 339,528 $ 391,763 $ 416,478

1,011 1,523 2,024 2,226 2,642 4,719
(4,084) (1,463) (3,878) (1,905) (3,816) (4,850)
2,392 1,975 2,812 1,577 3,120 3,913
2,797 602 1,386 1,689 1,591 4,159
2,245 2,625 3,862 3,813 5,137 5,102
185,521 249,948 298,437 346,927 400,436 429,521

(3,054) (3,786) (5,725) (6,677) (9,246) (11,011)

(321) (423) (501) (500) (600) (750)
(3,375) (4,209) (6,226) (7,177) (9,846) (11,761)

1,211 2,310 3,123 3,500 3,800 4,100

(120,000) (150,000) (200,000) (222,576) (264,169) (314,589)
(118,789) (147,690) (196,877) (219,076) (260,369) (310,489)

63,357 98,049 95,335 120,674 130,221 107,272

117,867 181,225 279,274 374,608 495,283 625,504
$ 181,225 $ 279,274 $ 374,608 $ 495,283 $ 625,504 $ 732,775
rojected
Year 9 Year 10

6,000 6,500
$ 225.00 $ 240.00

10.0% 10.0%
8.0% 6.0%
30.0% 25.0%
8.0% 8.0%

50.0% 50.0%
50.0% 50.0%
40.0% 40.0%

2.9% 3.0%
5.0% 6.0%

0.3% 0.3%
3.5% 3.7%
2.6% 2.6%
0.4% 0.4%
0.4% 0.4%

30.0% 30.0%

2.00 2.00
2.00 2.00
1.00 1.00
1.25 1.50
2.00 2.00
1.00 1.00
9.25 9.50

$ 70,192 $ 72,999
70,192 72,999
28,077 29,200
 93,589 97,332
93,589 97,332
70,192 72,999

4.0% 4.0%

rojected
Year 9 Year 10

1.5% 1.6%
2.6% 2.6%
1.9% 2.0%
1.7% 1.9%

0.8% 0.8%
(900) (1,100)

4,400 4,700
20.0% 20.0%

364,321 422,141

5.0% 5.0%
65.0% 65.0%
30.0% 30.0%

18,216 21,107
236,809 274,392
109,296 126,642
rojected
Year 9 Year 10

$ 1,350,000 $ 1,560,000
90,522 99,575
94,262 99,917
243,805 304,756
43,016 46,458
1,821,606 2,110,706

45,261 49,787
47,131 49,959
97,522 121,903
189,914 221,649

1,631,691 1,889,057

52,827 63,321
91,080 126,642
143,907 189,964

1,487,785 1,699,094

5,465 6,332
140,383 145,998
63,756 78,096
140,383 145,998
28,077 29,200
116,986 145,998
47,362 54,878
7,286 8,443
7,286 8,443
187,177 194,664
70,192 72,999
814,353 891,051

673,432 808,043

202,029 242,413

$ 471,402 $ 565,630
rojected
Year 9 Year 10

$ 673,432 $ 808,043
7,286 8,443
680,718 816,486

15.8% 15.9%
37.0% 38.3%
37.4% 38.7%
25.9% 26.8%

30.0% 30.0%
rojected
Year 9 Year 10

$ 844,948 $ 990,625
27,324 33,771
$ 872,272 $ 1,024,397

43,911 52,354
4,376 5,476
48,287 57,830

$ 920,559 $ 1,082,227

21,173 23,167
15,473 17,821
36,646 40,988

30,967 40,103
22,599 27,299
53,566 67,402

$ 90,212 $ 108,391

$ 830,347 $ 973,836

$ 920,559 $ 1,082,227

OK! OK!
rojected
Year 9 Year 10

$ 471,402 $ 565,630
7,286 8,443
(5,303) (6,447)
4,519 1,994
2,288 2,348
7,373 9,136
487,567 581,104

(14,573) (16,886)
(900) (1,100)
(15,473) (17,986)

4,400 4,700
(364,321) (422,141)
(359,921) (417,441)

112,173 145,678
732,775 844,948
$ 844,948 $ 990,625
Sample Private Company Financial Statements - Capital Capable Media LLC - US GAAP / IFRS-Co
($ USD as Stated)

Assumptions:

Potential Buyer's Tax Rate: 35.0%

Company Name: Capital Capable Media LLC

Private Company Discount: 30.0%

Historical
Income Statement: Units Year 1 Year 2

Gross Sales: $ $ 212,587 $ 404,857

Less: Allowances & Refunds: $ (6,378) (12,551)
Net Sales: $ 206,209 392,306

Operating Expenses:
General & Administrative: $ 39,415 97,836
Sales & Marketing: $ 78,266 126,680
Research & Development: $ 20,000 30,000
Depreciation & Amortization: $ 568 792
Total Operating Expenses: $ 138,249 255,308

Operating Income: $ 67,961 136,998

Net Interest Income / (Expense): $ - -
Pre-Tax Income: $ 67,961 136,998

Income Taxes: $ 35,548 61,614

Net Income: $ $ 32,413 $ 75,384

Historical
Key Metrics and Ratios: Units Year 1 Year 2

EBITDA Calculation:
Operating Income: $ $ 67,961 $ 136,998
Plus: Depreciation & Amortization: $ 568 792
EBITDA: $ 68,529 137,790

Revenue Growth: % N/A 90.2%

Operating Margin: % 33.0% 34.9%
EBITDA Margin: % 33.2% 35.1%
Net Margin: % 15.7% 19.2%
LLC - US GAAP / IFRS-Compliant

Historical
Year 3 Year 4

$ 610,871 $ 757,182
(21,380) (30,287)
589,491 726,895

136,604 158,201
202,250 244,918
112,000 122,500
1,011 1,523
451,866 527,142

137,625 199,753
- -
137,625 199,753

70,452 99,943

$ 67,173 $ 99,810

Historical
Year 3 Year 4

$ 137,625 $ 199,753
1,011 1,523
138,636 201,276

50.3% 23.3%
23.3% 27.5%
23.5% 27.7%
11.4% 13.7%
 Projected
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$ 954,123 $ 1,112,879 $ 1,320,846 $ 1,572,945 $ 1,821,606 $ 2,110,706

(39,119) (50,080) (59,438) (78,647) (91,080) (126,642)
915,004 1,062,800 1,261,408 1,494,298 1,730,525 1,984,064

188,965 224,999 279,222 340,036 404,635 437,635

319,779 373,020 461,676 536,325 635,541 749,335
180,000 192,302 214,451 324,974 366,665 394,306
2,024 2,226 2,642 4,719 7,286 8,443
690,769 792,545 957,991 1,206,053 1,414,128 1,589,719

224,235 270,254 303,417 288,244 316,397 394,345

- - - - - -
224,235 270,254 303,417 288,244 316,397 394,345

125,242 94,589 106,196 100,885 110,739 138,021

$ 98,994 $ 175,665 $ 197,221 $ 187,359 $ 205,658 $ 256,324

Projected
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$ 224,235 $ 270,254 $ 303,417 $ 288,244 $ 316,397 $ 394,345

2,024 2,226 2,642 4,719 7,286 8,443
226,259 272,480 306,059 292,963 323,683 402,788

25.9% 16.2% 18.7% 18.5% 15.8% 14.7%

24.5% 25.4% 24.1% 19.3% 18.3% 19.9%
24.7% 25.6% 24.3% 19.6% 18.7% 20.3%
10.8% 16.5% 15.6% 12.5% 11.9% 12.9%
Effective Tax Rate: % 52.3% 45.0%
51.2% 50.0%
55.9% 35.0% 35.0% 35.0% 35.0% 35.0%
 Historical
Balance Sheet: Units Year 1 Year 2
Assets:
Current Assets:
Cash & Cash Equivalents: $ $ 58,116 $ 132,433
Accounts Receivable: $ - 2,024
Total Current Assets: $ 58,116 134,458

Long-Term Assets:
Plants, Property & Equipment: $ 10,038 11,270
Other Assets: $ 127 381
Total Long-Term Assets: $ 10,165 11,651

Total Assets: $ $ 68,281 $ 146,109

Liabilities & Equity:

Current Liabilities:
Accounts Payable: $ 98 865
Accrued Expenses: $ 196 961
Total Current Liabilities: $ 294 1,826

Long-Term Liabilities:
Deferred Revenue: $ - 810
Other Non-Current Liabilities: $ 53 155
Total Long-Term Liabilities: $ 53 965

Total Liabilities: $ $ 347 $ 2,790

Equity: $ $ 67,934 $ 143,319

TOTAL LIABILITIES & EQUITY: $ $ 68,281 $ 146,109

Balance Sheet Check: OK! OK!

 Historical
Year 3 Year 4

$ 201,803 $ 304,975
6,109 7,572
207,911 312,547

13,314 15,577
702 1,125
14,016 16,702

$ 221,927 $ 329,248

3,257 5,232
3,758 4,360
7,015 9,591

3,054 5,679
1,366 3,676
4,420 9,355

$ 11,435 $ 18,946

$ 210,492 $ 310,302

$ 221,927 $ 329,248

OK! OK!
 Projected
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$ 407,072 $ 586,460 $ 786,308 $ 979,050 $ 1,189,799 $ 1,448,312

11,449 13,355 17,171 22,021 27,324 33,771
418,522 599,814 803,479 1,001,071 1,217,123 1,482,083

19,277 23,729 30,333 36,625 43,911 52,354

1,626 2,126 2,726 3,476 4,376 5,476
20,903 25,855 33,059 40,101 48,287 57,830

$ 439,425 $ 625,669 $ 836,538 $ 1,041,172 $ 1,265,411 $ 1,539,913

8,044 9,621 12,741 16,654 21,173 23,167

5,746 7,434 9,025 13,184 15,473 17,821
13,789 17,055 21,766 29,838 36,646 40,988

9,541 13,355 18,492 23,594 30,967 40,103

6,799 10,299 14,099 18,199 22,599 27,299
16,340 23,654 32,591 41,793 53,566 67,402

$ 30,130 $ 40,708 $ 54,357 $ 71,631 $ 90,212 $ 108,391

$ 409,295 $ 584,961 $ 782,182 $ 969,540 $ 1,175,198 $ 1,431,523

$ 439,425 $ 625,669 $ 836,538 $ 1,041,172 $ 1,265,411 $ 1,539,913

OK! OK! OK! OK! OK! OK!

 Historical
Cash Flow Statement: Units Year 1 Year 2

CASH FLOWS FROM OPERATING ACTIVITIES:

Net Income: $ $ 32,413 $ 75,384
Plus: Depreciation & Amortization: $ 568 792
Change in Accounts Receivable: $ - (2,024)
Change in Accounts Payable: $ 98 767
Change in Accrued Expenses: $ 196 765
Change in Deferred Revenue: $ - 810
Cash Flow from Operations: $ 33,274 76,494

CASH FLOWS FROM INVESTING ACTIVITIES:

Capital Expenditures (CapEx): $ (850) (2,024)
Sales / (Purchases) of Other Assets: $ (127) (254)
Cash Flow from Investing: $ (977) (2,278)

CASH FLOW FROM FINANCING ACTIVITIES:

Change in Other Non-Current Liab.: $ 53 102
Cash Flow from Financing: $ 53 102

Net Change in Cash: $ 32,350 74,317

Beginning Cash Balance: $ 25,766 58,116
Ending Cash Balance: $ $ 58,116 $ 132,433
 Historical
Year 3 Year 4

$ 67,173 $ 99,810
1,011 1,523
(4,084) (1,463)
2,392 1,975
2,797 602
2,245 2,625
71,533 105,071

(3,054) (3,786)
(321) (423)
(3,375) (4,209)

1,211 2,310
1,211 2,310

69,369 103,172
132,433 201,803
$ 201,803 $ 304,975
 Projected
Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

$ 98,994 $ 175,665 $ 197,221 $ 187,359 $ 205,658 $ 256,324

2,024 2,226 2,642 4,719 7,286 8,443
(3,878) (1,905) (3,816) (4,850) (5,303) (6,447)
2,812 1,577 3,120 3,913 4,519 1,994
1,386 1,689 1,591 4,159 2,288 2,348
3,862 3,813 5,137 5,102 7,373 9,136
105,200 183,065 205,894 200,402 221,822 271,798

(5,725) (6,677) (9,246) (11,011) (14,573) (16,886)

(501) (500) (600) (750) (900) (1,100)
(6,226) (7,177) (9,846) (11,761) (15,473) (17,986)

3,123 3,500 3,800 4,100 4,400 4,700

3,123 3,500 3,800 4,100 4,400 4,700

102,098 179,388 199,848 192,741 210,750 258,513

304,975 407,072 586,460 786,308 979,050 1,189,799
$ 407,072 $ 586,460 $ 786,308 $ 979,050 $ 1,189,799 $ 1,448,312

Discounted Cash Flow Analysis - Capital Capable Media LLC:

Financial Assumptions for DCF: Operating Assumptions for Extended

Discount Rate: 14.84% Annual Change in Revenue Growth:

Minimum Revenue Growth:
"Going Concern" Discount to Terminal Value: 25.0%
Annual Change in EBIT Margin:
Discount to Liquidation Value Terminal Value: Minimum EBIT Margin:

Depr. & Amort. % Revenue:

CapEx % Revenue:
Change in WC % Change in Revenue:

Terminal Value - Multiples Method: Terminal Value - Perpetuity Gro

Baseline Terminal EBITDA Multiple: 5.7 x Baseline Terminal FCF Growth Rate:
Baseline Terminal Value: $ 3,054,203 Baseline Terminal Value:
Terminal Value After "Going Concern" Discount: 2,290,652 Terminal Value After "Going Concern" Disc
Implied Terminal FCF Growth Rate: (0.4%) Implied Terminal EBITDA Multiple:
 Operating Assumptions for Extended Projection Period:

ual Change in Revenue Growth: (2.0%)

mum Revenue Growth: 4.0%

ual Change in EBIT Margin: (0.5%)

mum EBIT Margin: 15.0%

& Amort. % Revenue: 0.5%

x % Revenue: 1.0%
ge in WC % Change in Revenue: 3.0%

Terminal Value - Perpetuity Growth Method: Terminal Value - Liquidation Value Method:

ine Terminal FCF Growth Rate: 3.0% Final Projection Year Liquidation Value:
ine Terminal Value: $ 3,054,203 Cumulative FCF Beyond Final Year:
inal Value After "Going Concern" Discount: 2,290,652 Terminal Value Based on Asset Liquidation:
ed Terminal EBITDA Multiple: 4.3 x Terminal Value After Discount:
Value - Liquidation Value Method: Terminal Value - "Cease Operations" Method:

iquidation Value: $ 1,431,523 FCF Growth / (Decline) Rate:

nd Final Year: 1,541,716
on Asset Liquidation: 2,973,239
2,973,239
erations" Method:

(10.0%)
 PV of Terminal Value: 573,949 PV of Terminal Value:
Sum of PV of Free Cash Flows: 1,272,949 Sum of PV of Free Cash Flows:
Implied Enterprise Value: 1,846,899 Implied Enterprise Value:

% of Implied EV from Terminal Value: 31.1% % of Implied EV from Terminal Value:

Plus: Cash & Cash-Equivalents: 407,072 Plus: Cash & Cash-Equivalents:

Plus: Equity Investments:
Plus: Other Non-Core Assets, Net:
Plus: Net Operating Losses:
Less: Total Debt:
Less: Noncontrolling Interests:
Implied Equity Value:
- Plus: Equity Investments:
- Plus: Other Non-Core Assets, Net:
- Plus: Net Operating Losses:
- Less: Total Debt:
- Less: Noncontrolling Interests:
$ 2,253,971 Implied Equity Value:

Year 6 Year 7 Year 8 Year 9 Year 10

Revenue: $ 1,062,800 $ 1,261,408 $ 1,494,298 $ 1,730,525 $ 1,984,064

Growth Rate: N/A 18.7% 18.5% 15.8% 14.7%

OpInc (EBIT): 270,254 303,417 288,244 316,397 394,345

EBIT Margin: 25.4% 24.1% 19.3% 18.3% 19.9%

Less: Taxes: (94,589) (106,196) (100,885) (110,739) (138,021)

NOPAT: 175,665 197,221 187,359 205,658 256,324

Plus: D&A: 2,226 2,642 4,719 7,286 8,443

Change in WC: 5,174 6,032 8,325 8,878 7,031
Less: CapEx: (6,677) (9,246) (11,011) (14,573) (16,886)

Unlevered FCF: 176,388 196,648 189,391 207,250 254,913

Growth Rate: N/A 11.5% (3.7%) 9.4% 23.0%
PV of FCF: 164,594 159,782 133,995 127,677 136,742

Discount Period: 1.000 2.000 3.000 4.000 5.000

Mid-Year: 0.500 1.500 2.500 3.500 4.500
V of Terminal Value: 573,949 PV of Terminal Value:
um of PV of Free Cash Flows: 1,272,949 Sum of PV of Free Cash Flows:
ed Enterprise Value: 1,846,899 Implied Enterprise Value:

Implied EV from Terminal Value: 31.1% % of Implied EV from Terminal Value:

us: Cash & Cash-Equivalents: 407,072 Plus: Cash & Cash-Equivalents:

us: Equity Investments:
us: Other Non-Core Assets, Net:
us: Net Operating Losses:
ss: Total Debt:
ss: Noncontrolling Interests:
ed Equity Value:
- Plus: Equity Investments:
- Plus: Other Non-Core Assets, Net:
- Plus: Net Operating Losses:
- Less: Total Debt:
- Less: Noncontrolling Interests:
$ 2,253,971 Implied Equity Value:

Unlevered Free Cash Flow Projections

Year 11 Year 12 Year 13 Year 14 Year 15 Year 16

$ 2,235,067 $ 2,473,123 $ 2,687,071 $ 2,865,787 $ 2,999,073

12.7% 10.7% 8.7% 6.7% 4.7%

433,058 466,817 493,766 512,277 521,108

19.4% 18.9% 18.4% 17.9% 17.4%

(151,570) (163,386) (172,818) (179,297) (182,388)

281,488 303,431 320,948 332,980 338,720

11,175 12,366 13,435 14,329 14,995

7,530 7,142 6,418 5,361 3,999
(22,351) (24,731) (26,871) (28,658) (29,991)

277,842 298,207 313,931 324,013 327,723 294,951

9.0% 7.3% 5.3% 3.2% 1.1% (10.0%)
129,778 121,287 111,178 99,917 87,999 68,962

6.000 7.000 8.000 9.000 10.000 11.000

5.500 6.500 7.500 8.500 9.500 10.500
 744,980 Sum of PV of FCF Beyond Year 15:
1,272,949 Sum of PV of Free Cash Flows:
2,017,929 Implied Enterprise Value:

Terminal Value: 36.9% % of Implied EV from FCF Beyond Year 15:

Equivalents: 407,072 Plus: Cash & Cash-Equivalents:

- Plus: Equity Investments:
ore Assets, Net: - Plus: Other Non-Core Assets, Net:
- Plus: Net Operating Losses:
- Less: Total Debt:
- Less: Noncontrolling Interests:
$ 2,425,001 Implied Equity Value:

w Projections
Year 17 Year 18 Year 19 Year 20 Year 21 Year 22

265,456 238,910 215,019 193,517 174,166 156,749

(10.0%) (10.0%) (10.0%) (10.0%) (10.0%) (10.0%)
54,044 42,352 33,190 26,010 20,384 15,974

12.000 13.000 14.000 15.000 16.000 17.000

11.500 12.500 13.500 14.500 15.500 16.500
 290,933
1,272,949
1,563,882

18.6%

407,072
-
-
-
-
-
$ 1,970,954

Year 23 Year 24 Year 25

141,074 126,967 114,270

(10.0%) (10.0%) (10.0%)
12,518 9,810 7,688

18.000 19.000 20.000

17.500 18.500 19.500
Private Company WACC Analysis - Capital Capable Media LLC
($ USD as Stated)

Discount Rate Calculations - Assumptions

Risk-Free Rate: 2.05%
Equity Risk Premium: 7.00%
Pre-Tax Cost of Debt: 2.45%
Cost of Preferred Stock:
Market Correlation (R^2) for Education Companies: 19.88%
Adjustment for Portfolio Diversification of Potential Buyer: 25.00%

Comparable Companies - Unlevered Beta Calculation

Levered Preferred
Name Beta Debt % Debt Stock % Preferred
Nord Anglia Education Inc 0.32 $ 522.4 21.3% $ -
Strayer Education Inc 1.55 118.8 15.0% -
Capella Education Company 1.11 - -
American Public Education, Inc. 1.15 - -
Lincoln Educational Services Corp 2.11 43.9 45.3% -
National American University Holdings Inc 1.25 12.3 13.0% -

Median: 1.20 $ 28.1 14.0% $ -

Median "Total" Unlevered Beta:

Capital Capable Media LLC - Levered Beta & WACC Calculation

Unlevered Preferred
Beta Debt % Debt Stock % Preferred
"Optimal" Capital Structure: 1.93 14.0%

Cost of Equity Based on Comparables and "Optimal" Capital Structure:

WACC = Cost of Equity * % Equity + Cost of Debt * % Debt * (1 - Tax Rate) + Cost of Preferred Stock * % Preferred Stock

WACC, "Optimal" Capital Structure:

 Equity Unlevered
Value % Equity Tax Rate Beta
$ 1,924.7 78.7% 40.0% 0.28
671.1 85.0% 40.0% 1.40
800.5 100.0% 40.0% 1.11
595.1 100.0% 40.0% 1.15
52.9 54.7% 40.0% 1.41
82.1 87.0% 40.0% 1.15

$ 633.1 86.0% 40.0% 1.15

1.93

Equity Levered
Value % Equity Tax Rate Beta
86.0% 35.0% 2.14

17.01%

d Stock * % Preferred Stock

14.84%
Comparable Public Companies - For-Profit Education Companies with Less Than $500 Million US
($ USD in Millions Except Per Share Amounts in USD as Stated)

Operating Statistics Capitalization

Equity Enterprise Revenue
Company Name Value Value LTM
Nord Anglia Education Inc $ 1,924.7 $ 2,280.4 $ 474.6
Strayer Education Inc 671.1 627.6 446.0
Capella Education Company 800.5 633.4 422.0
American Public Education, Inc. 595.1 474.3 348.7
Lincoln Educational Services Corp 52.9 77.8 330.2
National American University Holdings Inc 82.1 74.7 127.8

Maximum $ 1,924.7 $ 2,280.4 $ 474.6

75th Percentile 768.2 632.0 440.0
Median 633.1 550.9 385.3
25th Percentile 210.3 176.9 334.9
Minimum 52.9 74.7 127.8

Valuation Statistics Capitalization Enterprise Value /

Equity Enterprise Revenue
Company Name Value Value LTM
Nord Anglia Education Inc $ 1,924.7 $ 2,280.4 4.8 x
Strayer Education Inc 671.1 627.6 1.4 x
Capella Education Company 800.5 633.4 1.5 x
American Public Education, Inc. 595.1 474.3 1.4 x
Lincoln Educational Services Corp 52.9 77.8 0.2 x
National American University Holdings Inc 82.1 74.7 0.6 x

Maximum $ 1,924.7 $ 2,280.4 4.8 x

75th Percentile 768.2 632.0 1.5 x
Median 633.1 550.9 1.4 x
25th Percentile 210.3 176.9 0.8 x
Minimum 52.9 74.7 0.2 x
with Less Than $500 Million USD in LTM Revenue

Revenue EBITDA EBITDA Margin

Forward Year 1 Forward Year 2 LTM Forward Year 1 Forward Year 2 LTM
$ 542.5 $ 616.1 $ 127.4 $ 143.6 $ 169.6 26.8%
431.6 443.6 102.4 95.6 104.3 23.0%
440.8 463.9 90.6 95.0 99.1 21.5%
368.9 385.2 74.1 75.3 80.1 21.2%
320.0 339.1 (34.3) (45.0) (15.6) (10.4%)
119.6 124.2 12.7 11.1 15.2 10.0%

$ 542.5 $ 616.1 $ 127.4 $ 143.6 $ 169.6 26.8%

438.5 458.8 99.4 95.5 103.0 22.6%
400.2 414.4 82.3 85.2 89.6 21.4%
332.2 350.6 28.1 27.2 31.4 12.8%
119.6 124.2 (34.3) (45.0) (15.6) (10.4%)

Enterprise Value / Enterprise Value /

Revenue EBITDA Price / Earnings Multi
Forward Year 1 Forward Year 2 LTM Forward Year 1 Forward Year 2 LTM
4.2 x 3.7 x 17.9 x 15.9 x 13.4 x 72.9 x
1.5 x 1.4 x 6.1 x 6.6 x 6.0 x 14.5 x
1.4 x 1.4 x 7.0 x 6.7 x 6.4 x 21.1 x
1.3 x 1.2 x 6.4 x 6.3 x 5.9 x 15.7 x
0.2 x 0.2 x NM NM NM NM
0.6 x 0.6 x 5.9 x 6.7 x 4.9 x 23.7 x

4.2 x 3.7 x 17.9 x 15.9 x 13.4 x 72.9 x

1.4 x 1.4 x 7.0 x 6.7 x 6.4 x 23.7 x
1.4 x 1.3 x 6.4 x 6.7 x 6.0 x 21.1 x
0.8 x 0.8 x 6.1 x 6.6 x 5.9 x 15.7 x
0.2 x 0.2 x 5.9 x 6.3 x 4.9 x 14.5 x
 EBITDA Margin Net Income
Forward Year 1 Forward Year 2 LTM Forward Year 1 Forward Year 2 Beta
26.5% 27.5% $ 26.4 $ 61.6 $ 78.2 0.32
22.1% 23.5% 46.4 36.8 41.5 1.55
21.6% 21.4% 37.9 42.2 46.5 1.11
20.4% 20.8% 37.8 40.9 43.5 1.15
(14.1%) (4.6%) (75.4) (18.8) (3.4) 2.11
9.3% 12.2% 3.5 6.0 6.8 1.25

26.5% 27.5% $ 46.4 $ 61.6 $ 78.2 2.11

22.0% 23.0% 37.9 41.9 45.8 1.48
21.0% 21.1% 32.1 38.9 42.5 1.20
12.1% 14.4% 9.2 13.7 15.5 1.12
(14.1%) (4.6%) (75.4) (18.8) (3.4) 0.32

Price / Earnings Multiple

Forward Year 1 Forward Year 2
31.3 x 24.6 x
18.2 x 16.2 x
19.0 x 17.2 x
14.5 x 13.7 x
NM NM
13.6 x 12.1 x

31.3 x 24.6 x
19.0 x 17.2 x
18.2 x 16.2 x
14.5 x 13.7 x
13.6 x 12.1 x
Valuation Summary - Capital Capable Media LLC
($ USD as Stated)

Valuation Statistics - Capital Capable Media LLC Capital Capable Media LLC - Range of Valuation Multip

75th 25th
Maximum Percentile Median Percentile
Methodology Name Multiple Multiple Multiple Multiple

Public Company Comparables:

LTM EV / Revenue: 4.8 x 1.5 x 1.4 x 0.8 x
Forward Year 1 EV / Revenue: 4.2 x 1.4 x 1.4 x 0.8 x
Forward Year 2 EV / Revenue: 3.7 x 1.4 x 1.3 x 0.8 x
LTM EV / EBITDA: 17.9 x 7.0 x 6.4 x 6.1 x
Forward Year 1 EV / EBITDA: 15.9 x 6.7 x 6.7 x 6.6 x
Forward Year 2 EV / EBITDA: 13.4 x 6.4 x 6.0 x 5.9 x
LTM Price / Earnings: 72.9 x 23.7 x 21.1 x 15.7 x
Forward Year 1 Price / Earnings: 31.3 x 19.0 x 18.2 x 14.5 x
Forward Year 2 Price / Earnings: 24.6 x 17.2 x 16.2 x 13.7 x

Precedent Transactions:
LTM EV / Revenue: 2.5 x 1.7 x 1.5 x 1.4 x
LTM EV / EBITDA: 13.5 x 12.1 x 11.1 x 10.1 x

Discounted Cash Flow Analysis:

13.5% - 15.5% Discount Rate, 2.0% - 4.0% Terminal FCF Growth Rate:
LC - Range of Valuation Multiples Capital Capable Media LLC - Range of Implied Equity Values

Applicable Private 25th 75th

Minimum Company Company Minimum Percentile Median Percentile Maximum
Multiple Figure Discount Multiple Multiple Multiple Multiple Multiple

0.2 x $ 915,004 30.0% $ 557,966 $ 905,577 $ 1,293,243 $ 1,353,497 $ 3,484,613

0.2 x 1,062,800 30.0% 587,952 994,426 1,419,927 1,485,642 3,534,305
0.2 x 1,261,408 30.0% 609,685 1,076,907 1,553,490 1,645,378 3,675,304
5.9 x 226,259 30.0% 1,336,408 1,377,968 1,420,833 1,514,629 3,242,022
6.3 x 272,480 30.0% 1,608,471 1,659,190 1,678,868 1,689,897 3,435,999
4.9 x 306,059 30.0% 1,459,317 1,675,656 1,696,178 1,776,494 3,287,701
14.5 x 98,994 30.0% 1,003,128 1,091,008 1,461,950 1,640,209 5,053,437
13.6 x 175,665 30.0% 1,670,284 1,788,969 2,240,788 2,331,002 3,843,166
12.1 x 197,221 30.0% 1,666,882 1,888,938 2,234,041 2,375,993 3,397,870

0.9 x $ 915,004 30.0% 983,525 1,303,776 1,367,826 1,495,927 2,008,329

8.0 x 226,259 30.0% 1,674,124 2,006,725 2,165,106 2,323,488 2,545,222

2,270,536 2,301,120 2,331,691 2,366,479 2,405,819

 Capital Capable Media LLC Valuation - Range of Implied
Public Company Comparables:
LTM EV / Revenue:
Forward Year 1 EV / Revenue:
Forward Year 2 EV / Revenue:
LTM EV / EBITDA:
Forward Yea r 1 EV / EBITDA:
Forward Yea r 2 EV / EBITDA:
LTM Pri ce / Ea rni ngs :
Forwa rd Yea r 1 Pri ce / Ea rni ngs :
Forwa rd Yea r 2 Pri ce / Ea rni ngs :
Precedent Transactions:
LTM EV / Revenue:

Discounted Cash Flow LTM EV / EBITDA:

Analysis:

13.5% - 15.5% Di s count Rate, 2.0% - 4.0% Termi na l FCF Growth Rate:
$- $500,000 $1,000,000 $1

Implied Equity Value

uation - Range of Implied Equity Values

Medi an to 75th
25th to Medi an
Col umn O
Col umn N

$1,000,000 $1,500,000 $2,000,000 $2,500,000

Value