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These spreadsheet exhibits relate to the case Teuer Furniture (A): Discounted Cash

Flow Valuation, Case #KEL778.

©2015 by the Kellogg School of Management at Northwestern University. This case


was prepared by Professor Mitchell A. Petersen. Teuer Furniture is a fictional
company whose profile was created based on data from real industry leaders.
Cases are developed solely as the basis for class discussion. Cases are not
intended to serve as endorsements, sources of primary data, or illustrations of
effective or ineffective management. To order copies or request permission to
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be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted
in any form or by any means—electronic, mechanical, photocopying, recording, or
otherwise—without the permission of Kellogg Case Publishing.
All values in 000's

Income Statement 2013 2014 2015 2016


Sales 169,039 185,641 203,152 217,132
COGS 71,284 78,545 84,799 89,209
Expenses 55,983 61,438 66,463 69,851
Depreciation 1,405 2,032 2,786 2,735
Taxes 16,147 17,450 19,642 22,134
Net Income 24,220 26,175 29,462 33,202

Balance Sheet 2013 2014 2015 2016


Book value of PPE 3,948 5,447 7,180 5,297
Accounts Receivable 54,831 60,216 65,897 70,431
Inventory 33,904 37,357 40,332 42,429
Accounts Payable 11,642 12,828 13,849 14,570
Accrued Expenses 2,691 2,953 3,194 3,357

Cash Flow 2013 2014 2015 2016


Net Income 24,220 26,175 29,462 33,202
Depreciation 1,405 2,032 2,786 2,735

Change in Accounts Receivable -6,632 -5,385 -5,680 -4,535


Change in Inventory -561 -3,453 -2,974 -2,098
Change in Accounts Payable 279 1,186 1,021 720
Change in Accrued Expenses 1,008 262 242 163

Cash flow from Operations 19,719 20,817 24,856 30,187

Cash flow from investing activities (Capex) -2,459 -3,531 -4,519 -852

Total cash flow 17,261 17,286 20,338 29,335

Valuation of the firm 2013 2014 2015 2016


Free cash flow to firm 17,261 17,286 20,338 29,335
Terminal Value

NPV 15,398 13,756 14,437 18,577


Value of the firm 328,167

Perpetual Growth 3.50%


Discount Rate 12%
2017 2018
228,072 236,569
91,996 93,961
72,539 74,750
2,346 1,997
24,476 26,345
36,714 39,517

2017 2018
3,320 2,036
73,980 76,736 32%
43,755 44,690 48%
15,025 15,346 16%
3,486 3,592 4.8%

2017 2018
36,714 39,517
2,346 1,997

-3,549 -2,756
-1,326 -935
455 321
129 106

34,770 38,250

-369 -713

34,402 37,537

2017 2018
34,402 37,537
451,755

19,434 246,567
Sales(in 000's) 2012 2013 2014 2015 2016
2003 6,034 6,235 6,430 6,618 6,799
2004 17,869 18,464 19,041 19,599 20,134
2005 24,499 25,315 26,108 26,872 27,605
2006 34,824 35,984 37,110 38,197 39,239
2007 43,541 44,991 46,399 47,758 49,061
2008 9,257 9,683 9,986 10,278 10,559
2009 3,540 4,001 4,176 4,299 4,416
2010 5,300 6,707 7,564 7,881 8,096
2011 3,354 4,610 5,823 6,555 6,816
2012 5,379 9,428 12,935 16,305 18,319
2013 0 3,622 6,337 8,677 10,917
2014 0 0 3,731 6,514 8,903
2015 0 0 0 3,597 6,268
Total Sales 153,597 169,039 185,641 203,152 217,132

COGS (in 000's) 2012 2013 2014 2015 2016


2003 2,416 2,476 2,554 2,629 2,700
2004 7,176 7,333 7,563 7,784 7,997
2005 9,042 10,055 10,369 10,673 10,964
2006 13,932 14,292 14,739 15,171 15,585
2007 17,856 17,870 18,429 18,969 19,486
2008 3,764 3,846 3,966 4,082 4,194
2009 1,887 1,589 1,659 1,707 1,754
2010 3,526 2,664 3,004 3,130 3,216
2011 2,357 2,592 2,313 2,603 2,707
2012 3,812 6,001 7,271 6,476 7,276
2013 0 2,567 4,033 4,878 4,336
2014 0 0 2,644 4,147 5,005
2015 0 0 0 2,549 3,990
Total COGS 65,767 71,284 78,545 84,799 89,209

SGA (in 000's) 2012 2013 2014 2015 2016


2003 791 848 874 900 925
2004 2,319 2,511 2,589 2,665 2,738
2005 3,693 3,443 3,550 3,654 3,754
2006 4,946 4,893 5,047 5,194 5,336
2007 5,917 6,118 6,310 6,495 6,672
2008 1,243 1,317 1,358 1,398 1,436
2009 615 544 568 585 601
2010 1,028 912 1,029 1,072 1,101
2011 701 797 792 891 927
2012 1,039 1,727 2,236 2,217 2,491
2013 0 700 1,161 1,500 1,485
2014 0 0 721 1,193 1,539
2015 0 0 0 695 1,148
Total SGA expense 22,292 23,810 26,235 28,460 30,152

Advertising (in 000's) 2012 2013 2014 2015 2016


2003 457 447 461 474 487
2004 1,287 1,323 1,364 1,404 1,442
2005 1,793 1,813 1,870 1,925 1,977
2006 2,287 2,577 2,658 2,736 2,811
2007 3,109 3,223 3,323 3,421 3,514
2008 675 694 715 736 756
2009 303 287 299 308 316
2010 473 480 542 565 580
2011 358 377 417 469 488
2012 569 838 1,058 1,168 1,312
2013 0 383 563 709 782
2014 0 0 395 579 728
2015 0 0 0 381 557
Total Advertising expense 11,313 12,441 13,665 14,874 15,751

Lease (in 000's) 2012 2013 2014 2015 2016


2003 302 302 302 302 381
2004 1,003 1,003 1,003 1,003 1,003
2005 1,510 1,510 1,510 1,510 1,510
2006 1,910 2,203 2,203 2,203 2,203
2007 2,530 2,530 2,824 2,824 2,824
2008 610 610 610 673 673
2009 280 280 280 280 321
2010 565 565 565 565 565
2011 610 610 610 610 610
2012 1,000 1,000 1,000 1,000 1,000
2013 0 668 668 668 668
2014 0 0 682 682 682
2015 0 0 0 652 652
Total Lease expense 10,320 11,281 12,257 12,972 13,092

Total Corporate Expenses 7,680 8,452 9,282 10,158 10,857

Total Depreciation 1,098 1,405 2,032 2,786 2,735

Income before tax 35,128 40,367 43,625 49,104 55,336

Corporate Tax 14,051 16,147 17,450 19,642 22,134

Income after tax 21,077 24,220 26,175 29,462 33,202


2017 2018
6,971 7,133 Year Growth Rate of sales 2012
20,643 21,123 1 70% 2013
28,303 28,962 2 33% 2014
40,231 41,167 3 23% 2015
50,301 51,472 4 9.7%
10,825 11,077 5 1.5% Year
4,527 4,633 6 0.3% 2013
8,301 8,494 2014
6,988 7,151 2015
19,012 19,454 2016
12,241 12,679 2017
11,179 12,510 2018
8,549 10,714
228,072 236,569

2017 2018
2,769 2,833 Year COGS (as % of sales)
8,199 8,390 1 71%
11,242 11,503 2 64%
15,979 16,351 3 56%
19,979 20,444 4 40%
4,300 4,400
1,798 1,840
3,297 3,374
2,776 2,840
7,551 7,727
4,862 5,036
4,440 4,969
4,806 4,255
91,996 93,961

2017 2018
948 970 Year SGA (as % of sales)
2,807 2,873 1 19%
3,849 3,939 2 18%
5,471 5,598 3 17%
6,841 7,000 4 14%
1,472 1,506
616 630
1,129 1,155
950 972
2,585 2,646
1,665 1,724
1,520 1,701
1,478 1,457
31,331 32,171

2017 2018
499 511 Year Advertising (as % of sales)
1,479 1,513 1 11%
2,027 2,074 2 8.9%
2,882 2,949 3 8.2%
3,603 3,687 4 7.2%
775 793
324 332
595 608
501 512
1,362 1,393
877 908
801 896
699 767
16,423 16,945

2017 2018
381 381 Year Lease per square feet
1,193 1,193 2012 20.45
1,510 1,706 2013 20.88
2,203 2,203 2014 21.30
2,824 2,824 2015 21.72
673 673 2016 22.16
321 321 2017 22.60
664 664 2018 23.05
610 710
1,000 1,127
668 668
682 682
652 652
13,382 13,805
Corporate Expense
11,404 11,828 5%

2,346 1,997

61,191 65,862

24,476 26,345 40%

36,714 39,517
Sales per square feet
110
113
117
120

Growth of furniture industry


3.0%
2.8%
2.6%
2.4%
2.2%
2.0%
Growth rate of lease per square feet
2%
Year No of stores Square foot opened Construction cost per sq feet
2003 1 17200 20.8
2004 3 17600 22.3
2005 4 18500 24.5
2006 5 21100 28.2
2007 6 22100 30.6
2008 2 15500 29.8
2009 1 14500 27.2
2010 2 14700 25.6
2011 2 15400 25.9
2012 3 16300 26.4
2013 2 16000 26.9
2014 2 16000 27.4
2015 2 15000 27.9
2016 0 0
2017 0 0
2018 0 0

Inflation 2003 2004 2005


2003 1.9% 5.1% 8.6%
2004 3.3% 6.7%
2005 3.4%
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Book value of Capex Construction Refresh cost Depreciation
(in 000's) Cost
2003 358 0 72
2004 1,175 0 307
2005 1,814 0 669
2006 2,971 0 1,264
2007 4,058 0 2,075
2008 924 0 2,188
2009 394 0 2,032
2010 752 0 1,820
2011 798 307 1,447
2012 1,293 1,021 1,098
2013 860 1,598 1,405
2014 876 2,655 2,032
2015 837 3,682 2,786
2016 0 852 2,735
2017 0 369 2,346
2018 0 713 1,997
70%
Construction Cost (in 000's) Refresh Cost (in 000's) Total Capex (in 000's) 2003 2004
358 358 72 72
1,175 1,175 235
1,814 1,814
2,971 2,971
4,058 4,058
924 924
394 394
752 752
798 307 1,105
1,293 1,021 2,314
860 1,598 2,459
876 2,655 3,531
837 3,682 4,519
0 852 852
0 369 369
0 713 713
Total 72 307

2006 2007 2008 2009 2010 2011


11.1% 15.2% 15.3% 18.0% 19.5% 22.4%
9.2% 13.3% 13.4% 16.1% 17.6% 20.6%
6.0% 10.0% 10.1% 12.9% 14.3% 17.3%
2.5% 6.6% 6.7% 9.4% 10.9% 13.9%
4.1% 4.2% 6.9% 8.4% 11.4%
0.1% 2.8% 4.3% 7.3%
2.7% 4.2% 7.2%
1.5% 4.5%
3.0%
Book value

286
1,155
2,299
4,007
5,990
4,725
3,087
2,019
1,677
2,894
3,948
5,447
7,180
5,297
3,320
2,036
Depreciation
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
72 72 72
235 235 235 235
363 363 363 363 363
594 594 594 594 594
812 812 812 812 812
185 185 185 185 185
79 79 79 79 79
150 150 150 150 150
221 221 221 221
463 463 463
492 492
706

669 1,264 2,075 2,188 2,032 1,820 1,447 1,098 1,405 2,032

2012 2013 2014 2015 2016 2017 2018 2019


24.2% 25.9% 27.7% 29.6% 31.7% 33.6% 35.4% 37.2%
22.3% 24.0% 25.8% 27.7% 29.8% 31.7% 33.5% 35.3%
19.0% 20.7% 22.5% 24.5% 26.6% 28.5% 30.3% 32.1%
15.6% 17.3% 19.1% 21.1% 23.2% 25.1% 26.9% 28.7%
13.1% 14.8% 16.6% 18.5% 20.6% 22.5% 24.3% 26.1%
9.0% 10.7% 12.5% 14.4% 16.6% 18.5% 20.3% 22.1%
8.9% 10.6% 12.4% 14.4% 16.5% 18.4% 20.2% 22.0%
6.2% 7.9% 9.7% 11.6% 13.7% 15.6% 17.4% 19.2%
4.7% 6.4% 8.2% 10.1% 12.2% 14.1% 15.9% 17.7%
1.7% 3.4% 5.2% 7.2% 9.3% 11.2% 13.0% 14.8%
1.7% 3.5% 5.4% 7.5% 9.4% 11.2% 13.0%
1.8% 3.8% 5.9% 7.8% 9.6% 11.4%
1.9% 4.1% 6.0% 7.8% 9.6%
2.1% 4.0% 5.8% 7.6%
1.9% 3.7% 5.5%
1.8% 3.6%
1.8%
2015 2016 2017 2018

221
463 463
492 492 492
706 706 706 706
904 904 904 904
170 170 170
74 74
143
2,786 2,735 2,346 1,997
Exhibit 1: Teuer Furnitures Showrooms and Square Footage

Stores Total SQ FT Total


Opened Stores Opened SQ FT
2003 1 1 17,200 17,200 40
2004 3 4 17,600 70,000
35
2005 4 8 18,500 144,000
2006 5 13 21,100 249,500 30
2007 6 19 22,100 382,100 25
2008 2 21 15,500 413,100
20
2009 1 22 14,500 427,600
2010 2 24 14,700 457,000 15
2011 2 26 15,400 487,800 10
2012 3 29 16,300 536,700
2013 2 31 16,000 568,700 5
2014 2 33 16,000 600,700 0
2015 2 35 15,000 630,700 2003 2005 2007 2009
Number of Showrooms
700,000

600,000

500,000

400,000

300,000

200,000

100,000

0
005 2007 2009 2011 2013 2015
Number of Showrooms Total Square Feet
Teuer Furniture Pro Forma Income Statement
2012 2013 2014 2015 2016 2017 2018 2019
Sales 148,218
CGS -61,955
SGA (exc adv & dep) -21,253
Advertising -10,744
Depreciation -1,450
Lease (stores) -9,320
Corp Expense (inc lease/adv) -7,411
Taxes -14,434
Net income 21,651

Parameters:
Corporate tax rate 40%
Corporate expenses 5%
Exhibit 8: Forecasting Sales Revenue and Costs
Year 1 2 3 4 5 6 7 8 9
Sales growth 2003 73.6% 34.6% 19.5% 15.1% 0.2% 1.2% 1.0% -0.6%
2004 72.9% 29.2% 21.4% 8.1% 3.6% 3.4% 0.0%
2005 76.6% 32.6% 22.2% 7.8% 3.7% -3.1%
2006 73.8% 28.8% 24.4% 11.3% -1.3%
2007 64.5% 36.8% 26.1% 6.3%
2008 60.5% 35.6% 23.6%
2009 69.0% 36.6%
2010 70.4%
2011
Average 70.2% 33.5% 22.9% 9.7% 1.5% 0.3%

Year 1 2 3 4 5 6 7 8 9
CGS 2003 71.1% 61.5% 57.8% 38.9% 43.4% 42.0% 38.9% 36.6% 40.0%
2004 71.3% 62.4% 52.1% 43.8% 39.0% 41.2% 38.7% 40.2%
2005 72.9% 65.6% 57.8% 40.6% 41.1% 40.3% 36.9%
2006 70.1% 53.1% 57.6% 33.3% 38.9% 40.0%
2007 72.6% 67.3% 53.9% 38.4% 41.0%
2008 64.4% 67.0% 61.0% 40.7%
2009 71.0% 65.9% 53.3%
2010 74.0% 66.5%
2011 70.3%
Average 70.9% 63.7% 56.2% 39.7%

Year 1 2 3 4 5 6 7 8 9
SGA 2003 19.9% 17.1% 16.4% 13.9% 12.9% 13.9% 13.6% 11.7% 13.1%
2004 17.6% 18.0% 17.4% 14.1% 14.5% 13.7% 13.9% 13.0%
2005 20.4% 17.9% 17.0% 14.5% 13.2% 13.2% 15.1%
2006 20.4% 19.0% 18.0% 12.7% 14.4% 14.2%
2007 19.8% 17.6% 18.0% 13.0% 13.6%
2008 16.4% 18.4% 16.9% 13.4%
2009 17.9% 19.2% 17.4%
2010 20.7% 19.4%
2011 20.9%
Average 19.3% 18.3% 17.3% 13.6%

Year 1 2 3 4 5 6 7 8 9
Advertising 2003 9.9% 8.9% 7.6% 7.1% 6.7% 7.7% 6.9% 6.8% 7.6%
2004 10.3% 8.2% 8.3% 7.4% 8.0% 7.7% 7.2% 7.2%
2005 10.9% 8.9% 8.0% 7.6% 7.0% 6.7% 7.3%
2006 10.3% 8.4% 8.3% 6.8% 6.8% 6.6%
2007 10.2% 9.0% 8.1% 6.9% 7.1%
2008 10.2% 9.6% 8.3% 7.3%
2009 11.0% 9.1% 8.6%
2010 11.7% 8.9%
2011 10.7%
Average 10.6% 8.9% 8.2% 7.2%
Exhibit 2: Economic Indicators: GDP and Furniture Sales Growth
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CPI index 180.9 184.3 190.3 196.8 201.8 210.0 210.2 215.9 219.2 225.7 229.6 233.5 237.7 242.3 247.4 252.1 256.6 261.3
Inflation (CPI) 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.7% 1.8% 1.9% 2.1% 1.9% 1.8% 1.8%
GDP (T$) 10,642 11,142 11,853 12,623 13,377 14,029 14,292 13,974 14,499 15,076 15,685 16,238 17,049 18,012 19,021 20,078 21,101
GDP growth 4.7% 6.4% 6.5% 6.0% 4.9% 1.9% -2.2% 3.8% 4.0% 4.0% 3.5% 5.0% 5.6% 5.6% 5.6% 5.1%
Furniture sales ($B) 94.44 96.7 103.8 109.1 112.8 111.1 99.6 86.3 87.3 90.1 93.1 95.9 98.6 101.2 103.6 105.9 108.0 110.2
Furniture sales growth 2.4% 7.3% 5.2% 3.4% -1.5% -10.4% -13.4% 1.2% 3.2% 3.4% 3.0% 2.8% 2.6% 2.4% 2.2% 2.0% 2.0%

10.0%

5.0%

0.0%
2003 2005 2007 2009 2011 2013 2015 2017

-5.0%

-10.0%

-15.0%
GDP Growth Furniture Sales Growth Inflation (CPI)
Exhibit 3: Teuer Furniture Income Statement
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sales 2,057 10,415 26,701 51,540 79,191 90,680 111,451 134,093 148,218 259834.9 356592.2 449646.3 460437.8 470567.5 479978.8
Cost of goods sold -1,463 -7,057 -17,424 -30,730 -43,834 -47,290 -49,068 -55,487 -61,955
Selling, general and admin -410 -1,812 -4,958 -9,230 -13,576 -14,679 -16,471 -18,698 -21,253
Advertising -203 -1,019 -2,411 -4,588 -6,585 -7,532 -8,367 -9,545 -10,744
Depreciation -72 -307 -669 -1,264 -2,075 -2,188 -2,032 -1,820 -1,450
Lease -250 -1,080 -2,330 -4,240 -6,770 -7,380 -7,712 -8,450 -9,320
Corporate expense -185 -729 -1,602 -3,092 -4,751 -5,441 -5,573 -6,705 -7,411
Taxes 0 0 0 0 0 -543 -8,892 -13,356 -14,434
Net income -526 -1,588 -2,693 -1,604 1,600 5,626 13,337 20,033 21,651

Parameters:
Corporate tax rate 40%
Exhibit 4: Teuer Furniture Balance Sheet
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Assets
Accounts Receivable 0 751 3,479 8,675 16,946 25,272 29,059 36,625 42,421 48,200
Inventory 671 3,151 8,216 15,125 20,908 21,715 24,868 26,808 29,216 33,343
Total Current Assets 671 3,902 11,695 23,800 37,853 46,987 53,927 63,433 71,637 81,543
PPE 358 1,461 2,969 5,270 8,065 6,914 5,119 3,839 3,142 3,920
Total Assets 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Liabilities and Equity


Accounts Payable 236 1,158 2,781 5,119 7,228 7,767 8,277 9,133 9,986 11,364
Accrued Expenses 29 145 358 658 958 1,055 1,203 1,359 1,519 1,682
Total Current Liabilities 265 1,303 3,139 5,777 8,186 8,822 9,480 10,493 11,505 13,046
Debt 0 0 0 0 0 0 0 0 0 0
Equity 764 4,061 11,525 23,293 37,732 45,079 49,565 56,779 63,274 72,417
Total Liabilities and Equity 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Balance sheet check


Exhibit 5: Teuer Furniture Income Statement for Individual Showrooms
# Avg Size 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2003 1 17,200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Sales 2,057 3,754 5,224 6,148 6,341 5,503 5,636 5,871 6,034
CGS 1,463 2,309 3,018 2,394 2,753 2,311 2,194 2,150 2,416
SGA 410 640 857 856 815 765 767 687 791
Advertising 203 334 399 434 422 423 391 401 457
Depreciation 72 72 72 72 72 0 0 0 65
Lease 250 250 250 250 250 250 302 302 302
2004 3 17,600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Sales 6,661 11,907 15,158 16,488 15,446 16,187 17,279 17,869
CGS 4,748 7,428 7,894 7,216 6,031 6,675 6,691 7,176
SGA 1,171 2,148 2,631 2,323 2,239 2,224 2,395 2,319
Advertising 685 971 1,266 1,213 1,235 1,241 1,245 1,287
Depreciation 235 235 235 235 235 0 0 0
Lease 830 830 830 830 830 830 1,003 1,003
2005 4 18,500 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Sales 9,570 16,651 19,785 20,951 22,847 24,451 24,499
CGS 6,978 10,917 11,430 8,499 9,387 9,857 9,042
SGA 1,953 2,977 3,371 3,039 3,021 3,228 3,693
Advertising 1,041 1,488 1,587 1,598 1,605 1,645 1,793
Depreciation 363 363 363 363 363 0 0
Lease 1,250 1,250 1,250 1,250 1,250 1,250 1,510
2006 5 21,100 1 2 3 4 5 6 7 8 9 10 11 12 13
Sales 13,583 21,142 23,592 29,702 34,105 34,824
CGS 9,526 11,229 13,594 9,902 13,259 13,932
SGA 2,767 4,016 4,237 3,780 4,895 4,946
Advertising 1,400 1,784 1,964 2,014 2,327 2,287
Depreciation 594 594 594 594 594 0
Lease 1,910 1,910 1,910 1,910 1,910 1,910
2007 6 22,100 1 2 3 4 5 6 7 8 9 10 11 12
Sales 15,435 22,001 30,466 39,628 43,541
CGS 11,205 14,801 16,422 15,232 17,856
SGA 3,050 3,878 5,471 5,166 5,917
Advertising 1,578 1,986 2,458 2,748 3,109
Depreciation 812 812 812 812 812
Lease 2,530 2,530 2,530 2,530 2,530
2008 2 15,500 1 2 3 4 5 6 7 8 9 10 11
Sales 3,187 5,176 7,244 9,257
CGS 2,053 3,467 4,421 3,764
SGA 522 951 1,225 1,243
Advertising 326 499 598 675
Depreciation 185 185 185 185
Lease 610 610 610 610
2009 1 14,500 1 2 3 4 5 6 7 8 9 10
Sales 1,437 2,507 3,540
CGS 1,021 1,652 1,887
SGA 257 480 615
Advertising 158 227 303
Depreciation 79 79 79
Lease 280 280 280
2010 2 14,700 1 2 3 4 5 6 7 8 9
Sales 3,008 5,300
CGS 2,226 3,526
SGA 623 1,028
Advertising 353 473
Depreciation 150 150
Lease 565 565
2011 2 15,400 1 2 3 4 5 6 7 8
Sales 3,354
CGS 2,357
SGA 701
Advertising 358
Depreciation 160
Lease 610
2012 3 16,300 1 2 3 4 5 6 7
Sales 5,379
CGS
SGA
Advertising
Depreciation
Lease 1,000
2013 2 16,000 1 2 3 4 5 6
Sales 3,622
CGS
SGA
Advertising
Depreciation
Lease 668
2014 2 16,000 1 2 3 4 5
Sales 3,731
CGS
SGA
Advertising
Depreciation
Lease 682
2015 2 15,000 1 2 3 4
Sales 3,597
CGS
SGA
Advertising
Depreciation
Lease 652

Parameters:
Lease rate (2013) 20.88
Lease inflation 2.0%
Exhibit 6: Teuer Furniture Balance Sheet for Individual Showrooms
# Avg Size 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2003 1 17,200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Cap expenditure 358 324
Accts receivable 751 1,187 1,665 1,975 2,040 1,700 1,745 1,742 1,902
Inventory 671 1,090 1,330 1,206 1,167 980 972 1,082 1,027 1,090
Accts payable 236 396 448 405 403 350 345 370 369 390
Accr expenses 29 49 62 61 61 53 54 57 58 58

2004 3 17,600 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Cap expenditure 1,175 936
Accts receivable 2,292 3,870 5,029 5,526 5,276 5,599 5,612 5,691
Inventory 2,061 3,590 4,304 3,352 2,851 3,042 3,248 3,397 3,619
Accts payable 762 1,255 1,421 1,124 1,025 1,090 1,124 1,139 1,153
Accr expenses 95 158 193 173 162 162 175 177 179

2005 4 18,500 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Cap expenditure 1,814
Accts receivable 3,140 5,508 6,296 6,231 7,149 7,751 7,950
Inventory 3,296 5,271 4,640 3,975 4,075 4,427 4,354 5,114
Accts payable 1,078 1,760 1,742 1,381 1,523 1,572 1,565 1,631
Accr expenses 138 212 240 203 240 244 251 259

2006 5 21,100 0 1 2 3 4 5 6 7 8 9 10 11 12
Cap expenditure 2,971
Accts receivable 4,433 6,593 7,974 10,040 10,908 11,761
Inventory 4,344 6,518 6,635 5,870 6,689 6,854 6,348
Accts payable 1,533 2,227 2,181 1,889 2,165 2,325 2,377
Accr expenses 193 272 300 291 337 343 362

2007 6 22,100 0 1 2 3 4 5 6 7 8 9 10 11
Cap expenditure 4,058
Accts receivable 4,817 6,829 9,849 12,400 13,920
Inventory 5,232 6,246 8,710 7,320 8,121 9,022
Accts payable 1,732 2,480 2,712 2,631 2,712 2,919
Accr expenses 213 293 362 381 436 435

2008 2 15,500 0 1 2 3 4 5 6 7 8 9 10
Cap expenditure 924
Accts receivable 1,048 1,758 2,212 2,905
Inventory 1,028 1,711 2,147 1,727 1,911
Accts payable 349 547 662 586 690
Accr expenses 43 72 88 94 101

2009 1 14,500 0 1 2 3 4 5 6 7 8 9
Cap expenditure 394
Accts receivable 484 840 1,191
Inventory 488 882 881 823
Accts payable 171 261 327 281
Accr expenses 21 34 43 44

2010 2 14,700 0 1 2 3 4 5 6 7 8
Cap expenditure 752
Accts receivable 956 1,787
Inventory 1,013 1,787 1,913
Accts payable 348 577 683
Accr expenses 44 71 91

2011 2 15,400 0 1 2 3 4 5 6 7
Cap expenditure 798
Accts receivable 1,093
Inventory 1,067 1,795
Accts payable 387 623
Accr expenses 47 76

2012 3 16,300 0 1 2 3 4 5 6
Cap expenditure 1,293
Accts receivable
Inventory 1,708
Accts payable 617
Accr expenses 79

2013 2 16,000 0 1 2 3 4 5
Cap expenditure 860
Accts receivable
Inventory
Accts payable
Accr expenses

2014 2 16,000 0 1 2 3 4
Cap expenditure 876
Accts receivable
Inventory
Accts payable
Accr expenses

2015 2 15,000 0 1 2 3
Cap expenditure 837
Accts receivable
Inventory
Accts payable
Accr expenses

Cap expenditure 2,229


Accts receivable 48,200
Inventory 33,343
Accts payable 11,364
Accr expenses 1,682
Exhibit 7: Teuer Furniture Cash Flow Assets
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sales 2,057 10,415 26,701 51,540 79,191 90,680 111,451 134,093 148,218
- Costs -2,582 -12,003 -29,394 -53,144 -77,591 -84,510 -89,222 -100,704 -112,132
- Taxes 0 0 0 0 0 -543 -8,892 -13,356 -14,434
Net income 0 -526 -1,588 -2,693 -1,604 1,600 5,626 13,337 20,033 21,651
- Capital expenditure -358 -1,175 -1,814 -2,971 -4,058 -924 -394 -752 -1,122 -2,229
+ Depreciation 0 72 307 669 1,264 2,075 2,188 2,032 1,820 1,450
- Increase in NWC -406 -2,193 -5,957 -9,467 -11,645 -8,498 -6,281 -8,494 -7,192 -8,365
Cash flow to assets -764 -3,823 -9,052 -14,461 -16,043 -5,747 1,139 6,123 13,539 12,508
Exhibit 9: Forecasting Investment
Year 1 2 3 4 5 6 7 8 9
Accounts Receivable 2003 36.5% 31.6% 31.9% 32.1% 32.2% 30.9% 31.0% 29.7% 31.5%
2004 34.4% 32.5% 33.2% 33.5% 34.2% 34.6% 32.5% 31.9%
2005 32.8% 33.1% 31.8% 29.7% 31.3% 31.7% 32.4%
2006 32.6% 31.2% 33.8% 33.8% 32.0% 33.8%
2007 31.2% 31.0% 32.3% 31.3% 32.0%
2008 32.9% 34.0% 30.5% 31.4%
2009 33.7% 33.5% 33.6%
2010 31.8% 33.7%
2011 32.6%
Average 32.4%

Year 1 2 3 4 5 6 7 8 9
Inventory 2003 45.9% 47.2% 44.0% 50.4% 42.4% 42.4% 44.3% 50.3% 42.5%
2004 43.4% 48.3% 54.5% 46.4% 47.3% 45.6% 48.5% 47.3%
2005 47.2% 48.3% 40.6% 46.8% 43.4% 44.9% 48.2%
2006 45.6% 58.0% 48.8% 59.3% 50.4% 49.2%
2007 46.7% 42.2% 53.0% 48.1% 45.5%
2008 50.1% 49.4% 48.6% 45.9%
2009 47.8% 53.4% 46.7%
2010 45.5% 50.7%
2011 45.3%
Average 47.6%

Year 1 2 3 4 5 6 7 8 9
Accounts Payable 2003 16.1% 17.2% 14.8% 16.9% 14.6% 15.2% 15.7% 17.2% 15.3%
2004 16.1% 16.9% 18.0% 15.6% 17.0% 16.3% 16.8% 15.9%
2005 15.4% 16.1% 15.2% 16.2% 16.2% 15.9% 17.3%
2006 16.1% 19.8% 16.0% 19.1% 16.3% 16.7%
2007 15.5% 16.8% 16.5% 17.3% 15.2%
2008 17.0% 15.8% 15.0% 15.6%
2009 16.8% 15.8% 17.3%
2010 15.6% 16.4%
2011 16.4%
Average 16.3%

Year 1 2 3 4 5 6 7 8 9
Accrued Expenses 2003 4.7% 5.1% 4.9% 4.7% 4.9% 4.5% 4.6% 5.2% 4.7%
2004 5.1% 5.1% 4.9% 4.9% 4.7% 4.7% 4.8% 4.9%
2005 4.6% 4.7% 4.8% 4.4% 5.2% 5.0% 4.6%
2006 4.6% 4.7% 4.8% 5.0% 4.7% 4.7%
2007 4.6% 5.0% 4.6% 4.8% 4.8%
2008 5.1% 5.0% 4.8% 4.9%
2009 5.2% 4.8% 4.7%
2010 4.5% 4.7%
2011 4.4%
Average 4.8%

Nominal Real
Construction costs 2003 20.8 25.9
2004 22.3 26.8
2005 24.5 28.6
2006 28.2 32.0
2007 30.6 33.5
2008 29.8 32.6
2009 27.2 28.9
2010 25.6 26.8
2011 25.9 26.4
2012 26.4 26.4
2013 26.9 26.4
2014 27.4 26.4
2015 27.9 26.4

Nominal Real
Refresh cost 2003 90.6% 74.0%
2004 79.6% 66.0%
Average 70.0%
Exhibit 10: Forecasting Parameters
1 2 3 4 5 6 7
Sales growth 70.2% 33.5% 22.9%
CGS (% sales) 70.9% 63.7% 56.2% 39.7%
SGA (% sales, excluding dep & advertising) 19.3% 18.3% 17.3% 13.6%
Advertising (% sales) 10.6% 8.9% 8.2% 7.2%
Accounts Receivable (% sales) 32.4%
Inventory (% next year's CGS) 47.6%
Accounts Payable (% next year's CGS) 16.3%
Accrued expenses (next year's SGA adv) 4.8%
Depreciation (years) 5
Refresh cost 70.0%
Corporate tax rate 40.0%
Corporate expenses 5.0%
Discount rate 12.1%
Long-term growth rate 3.5%
Shares outstanding (K) 9,945
Teuer Furniture Pro Forma Income Statement
2012 2013 2014 2015 2016 2017 2018 2019
Sales 148,218
CGS -61,955
SGA (exc adv & dep) -21,253
Advertising -10,744
Depreciation -1,450
Lease (stores) -9,320
Corp Expense (inc lease/adv) -7,411
Taxes -14,434
Net income 21,651

Parameters:
Corporate tax rate 40%
Corporate expenses 5%
Teuer Furniture Pro Forma Balance Sheet
2012 2013 2014 2015 2016 2017 2018
Assets
Accounts Receivable 48,200
Inventory 33,343
Total Current Assets 81,543
PPE 3,920
Total Assets 85,463

Liabilities and Equity


Accounts Payable 11,364
Accrued Expenses 1,682
Total Current Liabilities 13,046
Debt 0
Equity 72,417
Total Liabilities and Equity 85,463

Balance sheet check (A=L+E)


Teuer Furniture Pro Forma Cash Flow Assets
2012 2013 2014 2015 2016 2017 2018
Sales 148,218
- Costs -112,132
- Taxes -14,434
Net income 21,651
- Capital expenditure -2,229
+ Depreciation 1,450
- Increase in NWC -8,365
Cash flow assets 12,508
Terminal value

Asset value
Share value

Parameters:
Asset discount rate 12.1%
Long-term growth rate 3.5%
Shareholders (#) 187
Shares outstanding (K) 9,945