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KEY ASSUMPTIONS

yr 0 yr 1 yr 2 yr 3 yr 4 Total
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UNIT ECONOMICS/VOLUME
Customers 0 30 50 75 75
Wkly Hours/Customer all services 0.00 1.33 1.33 1.58 1.58
Wkly Hours/Customer lawn Cut 0.00 1.33 1.33 1.33 1.33
Total Hours/Week all services 0 40 67 119 119
Total Hours/ Week Lawn Cut 0 40 67 100 100
Total Hours/Year all services 0 1,920 3,200 5,700 5,700
Total Hours/year Lawn cut 0 1,920 3,200 4,800 4,800
Revenue/Hour $0 $20 $20 $20 $20
Cost/Hour of usage (total) $0 $12 $12 $14 $14
Labor (used for all services) $0 $10 $10 $12 $12
Gas (used for only cuts) $0 $2 $2 $2 $2
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OTHER CASH EXPENSES
G&A Hour/Year 0 150 300 400 400
Marketing Hours/Year 0 50 100 100 100
Average Overhead Cost/Hour $0 $20 $16 $16 $16
G&A Suppplies $0 $300 $400 $550 $550
Tax Rate 0.00% 25.00% 25.00% 30.00% 30.00%
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WORKING CAPITAL ASSUMPTIONS
Days Sales Outstanding 0 30 40 40 40
Days Wages Payable Outstanding 0 0 0 15 15
Gas Inventory Available $0 $100 $134 $200 $200
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CAPITAL EXPENDITURE ASSUMPTIONS
Annual CAPEX
Shed $0 $1,500 $0 $0 $0 $1,500
Lawn Mowers $0 $500 $500 $250 $0 $1,250
Rakes, Hedge Clippers, etc. $0 $0 $0 $500 $0 $500
Truck $0 $0 $6,000 $0 $0 $6,000
Total $0 $2,000 $6,500 $750 $0 $9,250
Annual Depreciation
Shed $0 $75 $75 $75 $75 $300
Lawn Mowers $0 $100 $200 $250 $250 $800
Rakes, Hedge Clippers, etc. $0 $0 $0 $100 $100 $200
Truck $0 $0 $2,000 $2,000 $2,000 $6,000
Total $0 $175 $2,275 $2,425 $2,425 $7,300
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INVESTMENT/FINANCING ASSUMPTIONS
Common Stock Outstanding $0 $2,100 $2,100 $2,100 $2,100
Debt Outstanding @ EOY $0 $0 $3,000 $3,000 $0
Average Debt Outstanding $0 $0 $3,000 $3,000 $0
Interest @ 7% $0 $0 $210 $210 $0
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RETURN AND PERFORMANCE METRICS
% revenue growth 66.67% 78.12% 0.00%
Gross Margin % 40.00% 40.00% 31.58% 31.58%
EBITDA % 28.80% 29.38% 24.08% 24.08%
Return on Sales 21.26% 19.12% 15.24% 15.37%
Return On Assets 79.54% 52.07% 62.01% 68.62%
Return on Equity 79.54% 59.69% 79.42% 78.24%
Return on Invested Captial (ROIC)** 79.54% 52.74% 70.43% 78.24%

current ratio N/A N/A 3.85 7.51


quick ratio 3.82 7.45
Inventory Turn 230.40 286.57 390.00 390.00

Net Income + Depreciation 8,339 14,511 19,795 19,942


Cash flow From Operations 5,083 10,620 17,390 19,942
Total Cash Flow 5,183 5,120 640 (58)

Debt/Equity 0.00% 14.63% 13.72% 0.00%


Debt/Total Assets 0.00% 12.77% 10.71% 0.00%
Interest Coverage N/A 90 131 N/A
DSC N/A 90 9 N/A
_____________________________________________________________________________________________________
** ROIC = (EBIT * (1-Tx Rate)) / (Owners Equity + Long Term Debt + Short Term Debt) = return % to all invested capital
Pro Forma Income Statements
_______________________________________________________________________

Yr 1 Yr 2 Yr 3 Yr 4
____________ ____________ ____________ ____________

Revenue @ $20/hour: $38,400.19 $64,000.32 $114,000.00 $114,000.00

Cost of Goods sold: ($23,040.12) ($38,400.19) ($78,000.05) ($78,000.05)

labor at $10-$12/hr ($19,200.10) ($32,000.16) ($68,400.00) ($68,400.00)


gas at $2/gallon ($3,840.02) ($6,400.03) ($9,600.05) ($9,600.05)

Gross Margin: $15,360.08 $25,600.13 $35,999.95 $35,999.95

Operating Expenses: ($4,300.00) ($6,800.00) ($8,550.00) ($8,550.00)

G&A ($3,000.00) ($4,800.00) ($6,400.00) ($6,400.00)


Marketing ($1,000.00) ($1,600.00) ($1,600.00) ($1,600.00)
supplies and maintenance ($300.00) ($400.00) ($550.00) ($550.00)

EBITDA $11,060.08 $18,800.13 $27,449.95 $27,449.95

Depreciation: ($175.00) ($2,275.00) ($2,425.00) ($2,425.00)


Interest Expense $0.00 ($210.00) ($210.00) $0.00

Earnings Before Taxes $10,885.08 $16,315.13 $24,814.95 $25,024.95

Taxes ($2,721.27) ($4,078.78) ($7,444.49) ($7,507.49)

Net Income After Tax $8,163.81 $12,236.35 $17,370.47 $17,517.47


_________________________________________________________________________________________________
Summary Statistics:

Revenue $38,400.19 $64,000.32 $114,000.00 $114,000.00


Net Income $8,163.81 $12,236.35 $17,370.47 $17,517.47
Net Income + depreciation $8,338.81 $14,511.35 $19,795.47 $19,942.47
EBITDA $11,060.08 $18,800.13 $27,449.95 $27,449.95
Gross Margin $15,360.08 $25,600.13 $35,999.95 $35,999.95
Profit Margin (net income/revenue) 21.26% 19.12% 15.24% 15.37%
Gross Margin percentage (Gross Margin/re 40.00% 40.00% 31.58% 31.58%
Pro Forma Balance Sheets
__________________________________________________________________________________________

Beg. BS YR 1 Yr 2 Yr 3 Yr 4
___________ ____________ ___________ ___________ ___________
Assets:

Cash $0.00 $5,182.63 $10,302.42 $10,942.20 $10,884.66


Securities $0.00 $0.00 $0.00 $0.00 $0.00
Receivables $0.00 $3,156.18 $7,013.73 $12,493.15 $12,493.15
Inventory $0.00 $100.00 $134.00 $200.00 $200.00

Current Assets $0.00 $8,438.81 $17,450.15 $23,635.35 $23,577.82

Long Term PPE


Gross Book Value Lawn Mowers $0.00 $500.00 $1,000.00 $1,250.00 $1,250.00
Gross Book Value Shed $0.00 $1,500.00 $1,500.00 $1,500.00 $1,500.00
Gross Book Value Rakes Clipper etc $0.00 $0.00 $0.00 $500.00 $500.00
Gross Book Value Truck $0.00 $0.00 $6,000.00 $6,000.00 $6,000.00
Accumulated Depreciation all PPE $0.00 ($175.00) ($2,450.00) ($4,875.00) ($7,300.00)
Net Book Value of Long Term PPE $0.00 $1,825.00 $6,050.00 $4,375.00 $1,950.00

Total Assets $0.00 $10,263.81 $23,500.15 $28,010.35 $25,527.82

Liabilities and Owners Equity

Accounts Payable $0.00 $0.00 $0.00 $0.00 $0.00


Salaries Payable $0.00 $0.00 $0.00 $3,139.73 $3,139.73
Current Loans Payable $0.00 $0.00 $0.00 $3,000.00 $0.00

Current Liabilites $0.00 $0.00 $0.00 $6,139.73 $3,139.73

Long Term Debt $0.00 $0.00 $3,000.00 $0.00 $0.00

Total Liabilities $0.00 $0.00 $3,000.00 $6,139.73 $3,139.73

Common Stock $0.00 $2,100.00 $2,100.00 $2,100.00 $2,100.00


Preferred Stock $0.00 $0.00 $0.00 $0.00 $0.00
Retained Earnings $0.00 $8,163.81 $18,400.15 $19,770.62 $20,288.09

Total Owner's Equity $0.00 $10,263.81 $20,500.15 $21,870.62 $22,388.09

Total Liabilites and Owners Equity $0.00 $10,263.81 $23,500.15 $28,010.35 $25,527.82
_____________________________________________________________________________________________________________________________
Pro forma Statements of Cash flows

Yr 1 Yr 2 Yr 3 Yr 4 Sale Beg yr 5
___________ ___________ ___________ ___________ ___________

Net Income $8,163.81 $12,236.35 $17,370.47 $17,517.47


Depreciation $175.00 $2,275.00 $2,425.00 $2,425.00
Receivables ($3,156.18) ($3,857.55) ($5,479.42) $0.00
Inventory ($100.00) ($34.00) ($66.00) $0.00
Other ST Assets $0.00 $0.00 $0.00 $0.00
Accounts Payable $0.00 $0.00 $0.00 $0.00
Wages Payable $0.00 $0.00 $3,139.73 $0.00
Other ST Liabilities $0.00 $0.00 $0.00 $0.00

Cash Flow From Operations $5,082.63 $10,619.79 $17,389.78 $19,942.47 $0.00

PP&E ($2,000.00) ($6,500.00) ($750.00) $0.00


Investments $0.00 $0.00 $0.00 $0.00
Other Long Term Assets $0.00 $0.00 $0.00 $0.00

Cash Used for Investments ($2,000.00) ($6,500.00) ($750.00) $0.00 $72,000.00

Short Term Debt $0.00 $0.00 $3,000.00 ($3,000.00)


Long Term Debt $0.00 $3,000.00 ($3,000.00) $0.00
Preferred Stock $0.00 $0.00 $0.00 $0.00
Common Stock $2,100.00 $0.00 $0.00 $0.00
Dividends $0.00 ($2,000.00) ($16,000.00) ($17,000.00) ($72,884.66)

Cash from Financing $2,100.00 $1,000.00 ($16,000.00) ($20,000.00) ($72,884.66)

Cash Flow $5,182.63 $5,119.79 $639.78 ($57.53) ($884.66)


Beginning Cash Balance $0.00 $5,182.63 $10,302.42 $10,942.20 $10,884.66
Ending Cash Balance $5,182.63 $10,302.42 $10,942.20 $10,884.66 $10,000.00
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Net Terminal Value Available for Distribution $72,000.00 + $884.66 of excess cash
Recurring CF is $18,000 = Net Income + Depreciation + (1-tx rate)*Interest-recurring capital expenses of $1,942.47
Assume discount is 25% on recurring cash flow to calculate Gross Terminal Value, or 4 X $18,000 = $72,000
assume $10,000 cash stays in Company but rest can be distributed, which = $72,000 + excess cash of $884.66
other working capital stays in company
All Debt must be paid off by seller

Time 0 Year 1 Year 2 Year 3 Year 4 + 5


Total Investor Cash Flow ($2,100.00) $0.00 $179.62 $1,436.96 $8,072.54
Investor Ownership 8.98%

Investor IRR and Multiple 50.003323% 4.61 X


Post and Pre Money Value $23,382.70 $21,282.70
Investor Return Analysis
Year
yr 0 yr 1 yr 2 yr 3 yr 4 + sale
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Base Case:

Revenue 38,400.19 64,000.32 114,000.00 114,000.00


Expenses (30,236.38) (51,763.97) (96,629.54) (96,482.54)
__________________________________________________________________________________________________
Net Income 8,163.81 12,236.35 17,370.47 17,517.47
+ Depreciation 175.00 2,275.00 2,425.00 2,425.00
-Changes in Working Capital (3,256.18) (3,891.55) (2,405.69) 0.00
-CAPEX (2,000.00) (6,500.00) (750.00) 0.00
_________________________________________________________________________________________________
Annual Cash Flow Before Financing 3,082.63 4,119.79 16,639.78 19,942.47
+Equity Investment made/(Payed Off 2,100.00 0.00 0.00 0.00 0.00
+Debt Raised/(Paid Off) 0.00 3,000.00 0.00 (3,000.00)
-Dividends/Distributions 0.00 (2,000.00) (16,000.00) (17,000.00)
_____________________________________________________________________________________________
Total Co Cash Flow before Sale 2,100.00 3,082.63 5,119.79 639.78 (57.53)

Net Terminal Value available for Distribution 0.00 0.00 0.00 72,884.66
_________________________________________________________________________________________________

Investor Ownership 8.98%


Investor Cash Flow (2,100.00) 0.00 179.62 1,436.96 8,072.54

Investor IRR and Multiple 50.00% 4.61 X


Post Money Valuation = PV yr 0 23,382.70 EBITA MULT = 2.62 X
Pre Money Valuation = NPV yr 0 21,282.70 SALES MULT = 0.63 X
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Notes:
Final year investor cash flow equals (YR 4 dividends * ownership %) + (Total Terminal Value * ownership %)
Net Enterprise Value End of Year 4 = $72,000
Reccurring Cash Flow after yr 5+ = $18,000 = NI+depreciation+ (1-tx rate)* interest -CAPEX of $1,942.47
New Buyer's Discount rate = 25%; or multiple of cash flow equals 4.0X = 1/.25
TotL Terminal Value end of year 4 = Enterprise Value - Debt + Excess Cash = $72,884.66
Adjustment to Enterprise Value Year 4
-Usually excess cash on Balance sheet goes to seller. Here it is everything over $10,000 =$884.66
-Working Capital (short term assets - Short Term Liabilities except debt) stay in company
-All Debt is paid off by seller, because valuation based on pre-debt cash flow of company. Here Debt = $0

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