Danika

Li

U0888022

GROCERY STORE MINI CASE REPORT

FIN 3041 LINS

Question 1: Should GSI Invest In This Project?

The simple answer is yes, GSI should invest in this project based both on the

NPV and IRR cutoffs. If you refer to exhibit one, based on the given assumptions and

the calculated investment, operation, and terminal cash flows, the NPV comes out to

a positive value of $1,547,967 (written in 1000s as $1,548 on the exhibit). Because

the project has a positive NPV, it meets GSIs NPV investment rule to approve

projects.

Secondly, the project also meets GSIs IRR rule. Using the given assumptions,

Ive generated the cash flows shown at the bottom of exhibit 1. I then used excels

IRR function to generate the IRR of 12.51%, which is higher than WACC and

therefore allows the project to pass the IRR investment rule for approval. However,

it should be noted that this IRR should be viewed with skepticism, as the total cash

flows change signs from positive to negative flows in year 10 (fiscal year 2027).

Because the signs have changed, this generates two possible IRRs. Ive chosen to use

the IRR generated by excels IRR function to conduct my analysis, but I recognize

that theres another possible IRR root.

Important Investment Rules to Consider:

Depreciation: Although depreciation in general is important to consider

because it alters the amount of taxes you pay, the method of depreciation

was also very important. Because the fixtures and equipment were

depreciated based on the 5 year MACRS values, it affected cash flows

differently than if they had been straight line depreciated up until their

replacement date. Although both methods depreciate to zero, straight-line

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depreciation produces a lower NPV because later cash flows have less

present value.

Terminal cash flows: At the end of the project cycle, its important to

remember that NWC can be recovered, generating a positive cash flow.

Additionally, salvage values have to be considered. Because the land and

building were sold for $5,000,000 which is higher than the ending book

value, taxes had to be deducted on the salvage, and the cash flow from the

sale of the land and building is less than the $5,000,000 sell price. If NWC

recovery hadnt been considered, a positive cash flow would have been lost

and NPV wouldve been understated. Additionally, if the terminal cash flow

from the salvage of land and building hadnt taken tax losses out, then that

cash flow would have been overstated and NPV overstated.

Changes in NWC: When analyzing NPV, only consider incremental cash

flows. Although total working capital changes and grows at 2% per year, the

actual incremental cash flows are only that 2% growth portion, not the

amended totals. Exhibit one includes both the amended totals and the

changes in NWC from year to year, but only take the incremental changes

into account when totaling the cash flows. If NWC is accounted for in total

instead of incremental terms, negative cash flows are overstated and NPV is

understated.

Lost revenue: All effects of the project have to be considered, beyond just

direct costs and depreciation on equipment and land used in the project.

Another given assumption is that the creation of the new store is going to
 4

generate an incremental loss of $300,000 from an existing store. This loss has

to be recorded in each time periods cash flows as well. Additionally, this lost

revenue has to have tax applied to it, as that $300,000 of revenue wouldnt

have been flat revenue, but taxed. A failure to account for this lost revenue

results in cash flows before overstated and NPV being overstated. However,

if you consider the lost revenue but forget to tax it, you overstate the loss and

understate your NPV.

QUESTION 2: REVISED ASSUMPTIONS

WACC (Exhibit 2): The first assumption I revised is to change WACC. WACC

can change depending on the weight of equity vs the weight of debt, as well

as the required returns on each half of WACC. In exhibit 2, I presented three

different values for WACC. For my first value, I simply revised my WACC

based on a dataset, which provided WACC for industries in the U.S. For retail

grocery stores, WACC was 4%. By revising WACC to 4%, NPV skyrockets, so

the decision in question 1 doesnt change but rather is reinforced by a lower

WACC. However, I began to slowly increase WACC by 1% at a time and found

that a simple 2% increase in WACC turned NPV from a positive value to a

negative value of -$445,000. With a negative NPV, if WACC had been 13%

instead of 11%, the project would not have moved forward.

Depreciation (Exhibit 3): The second assumption I revised is if fixtures and

equipment had been straight-line depreciated over their useful life of 10

years, as opposed to being depreciated on the 5-year MACRS basis. Although

 5

it doesnt change the decision to invest, it lowers NPV as well as IRR. This has

no effect on the ultimate decision to invest, but shows that depreciating

based on straight-line as opposed to MACRS lowers the value and return on a

project.

Tax rate (Exhibit 4 and 5): Just as I revised WACC, I revised tax rate in

Exhibit 4 based on the average tax rate of retail grocery stores in the U.S. The

revised tax rate is 24.11%. By almost halving the tax rate, total NPV almost

quadruples. Additionally, IRR goes up by almost 3%. A tax decrease

reinforces the decision to invest both on the NPV and IRR guidelines.

However, I raised the tax rate by 1% increments until I found a value that

would yield a negative NPV, and showed this effect in Exhibit 5. In this

exhibit, an 8% increase in taxes from 40% to 48% turned the NPV to a

negative value of -$84,000 and also decreased IRR to 10.92%, which is below

WACC. However, its important to note again with tax rate changes that cash

flows still change signs in both Exhibit 4 and 5, meaning that IRR analysis

should be taken with a grain of salt. For both Exhibit 4 and 5 Ive continued to

stick with the IRR generated by the excel function, but theres another

possible IRR root. Regardless, in Exhibit 5 the negative NPV disqualifies the

project no matter the IRR value.

Salvage value (Exhibit 6 and 7): In this exhibit, I revise the assumption of

salvage value on land and building of $5 million and instead reduce the

salvage value to the book value of the land ($3,720,000). By doing this, NPV is

reduced but not negative, and IRR falls but not below 11%. Because of this,
 6

the decision to invest is not changed. However, unlike tax and WACC, I was

unable to find a value where the salvage price would generate a negative

NPV. Even at 0 salvage value (Exhibit 7), NPV was still positive and IRR was

still higher than 11%. The only situation where terminal cash flow might

change the decision to invest is if the firm was required to put forth

substantial costs to shut down the project (paying to clear the land, demolish

the building, etc) that could generate a large enough negative cash flow that

NPV would become negative/IRR would drop below 11%.

NWC (Exhibit 8): The assumption I changed in exhibit 8 was the amount of

additional NWC that was required each consecutive year. To find the amount

of NWC increase that would yield an investment change, I simply increased

the % change in NWC every year by 1% until I hit a value that generated

negative NPV. For this project, if NWC was required to grow by 11% a year,

then NPV would be a negative value and the decision to invest would be

withdrawn. However, NWC increases fewer than 11% a year would still yield

smaller but positive NPVs and therefore investment would still move

forward. Additionally, NWC increases of 11%/year also cause IRR to fall

under 11%. However, IRR analysis should always be taken with a grain of

salt due to changing cash flow signs that generate two possible IRR roots.

Pre or post-tax revenue loss (Exhibit 9): The last assumption I revised was

that in the original NPV analysis, the $300,000/year revenue lost was pre-

tax. After taxation, the annual loss of revenue from the other GSI store was -

$180,000/year. However, I ran an analysis of the project where the

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$300,000/year loss was a post-tax value, therefore generating -$300,000

cash flows per year instead of -$180,000. This caused NPV and IRR to drop

dangerously low, but not into the negative or <11% IRR ranges, and

therefore it wasnt enough of an impact to change the investment decision.

Again, IRR analysis is done with the understanding that there are two IRR

roots due to cash flow sign changes.

 EXHIBIT 1
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,202 1,485 1,500 1,590 1,785 1,804 1,828 1,920 2,016 -734 2,343 2,479 2,332 2,244 2,243 2,177 2,110 2,109 2,108 9,084

WACC 11%
NPV
(1,000) $1,549
IRR 12.51%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 2
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,202 1,485 1,500 1,590 1,785 1,804 1,828 1,920 2,016 -734 2,343 2,479 2,332 2,244 2,243 2,177 2,110 2,109 2,108 9,084

WACC 4% WACC 11% WACC 13%

NPV NPV NPV

(1,000) $14,573 (1,000) $1,549 (1,000) ($445)
IRR 12.51% IRR 12.51% IRR 12.51%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 3
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285 285
EBIT 0 1,492 1,737 2,007 2,303 2,629 2,773 2,922 3,077 3,239 3,407 3,407 3,407 3,407 3,407 3,407 3,407 3,407 3,407 3,407 3,407
Income Tax (40%) 0 597 695 803 921 1,052 1,109 1,169 1,231 1,295 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363 1,363
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,301 1,448 1,610 1,788 1,984 2,070 2,159 2,252 2,349 2,450 2,450 2,450 2,450 2,450 2,450 2,450 2,450 2,450 2,450 2,450

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,088 1,234 1,395 1,572 1,767 1,853 1,942 2,034 2,130 -620 2,229 2,228 2,227 2,227 2,226 2,225 2,224 2,223 2,222 9,198

WACC 11%
NPV
(1,000) $1,292
IRR 12.24%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value/10; 10: useful life of fixture until replacement in year 10 and project end in year 20
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 4
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692

Income Tax (24.11%) 0 291 268 421 545 624 698 773 811 850 890 753 670 758 811 811 850 890 890 890 890
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,607 1,876 1,992 2,164 2,412 2,481 2,555 2,673 2,795 2,923 3,060 3,142 3,054 3,002 3,002 2,962 2,923 2,923 2,923 2,923

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,394 1,661 1,777 1,949 2,196 2,264 2,337 2,454 2,576 -147 2,839 2,921 2,832 2,778 2,778 2,737 2,697 2,696 2,695 9,671

WACC 11%
NPV
(1,000) $4,793
IRR 15.46%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.2411
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 5
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (48%) 0 579 533 837 1,085 1,241 1,389 1,539 1,614 1,691 1,772 1,498 1,334 1,509 1,614 1,614 1,693 1,772 1,772 1,772 1,772
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,319 1,610 1,575 1,624 1,794 1,790 1,789 1,869 1,953 2,041 2,314 2,478 2,303 2,198 2,198 2,119 2,041 2,041 2,041 2,041

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,105 1,396 1,361 1,409 1,578 1,573 1,571 1,651 1,734 -1,029 2,093 2,257 2,081 1,975 1,974 1,894 1,815 1,814 1,813 8,789

WACC 11%
NPV
(1,000) ($84)
IRR 10.92%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.48
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 6
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3, 720

TOTAL CASH FLOW -12,699 1,202 1,485 1,500 1,590 1,785 1,804 1,828 1,920 2,016 -734 2,343 2,479 2,332 2,244 2,243 2,177 2,110 2,109 2,108 8,316

WACC 11%
NPV
(1,000) $1,454
IRR 12.43%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 3,720-(3,720-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 7
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -

TOTAL CASH FLOW -12,699 1,202 1,485 1,500 1,590 1,785 1,804 1,828 1,920 2,016 -734 2,343 2,479 2,332 2,244 2,243 2,177 2,110 2,109 2,108 4,596

WACC 11%
NPV
(1,000) $992
IRR 12.03%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: 0 (no salvage value)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 8
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,859 -2,064 -2,291 -2,543 -2,822 -3,133 -3,478 -3,860 -4,285 -4,756 -5,279 -5,860 -6,504 -7,220 -8,014 -8,896 -9,874 -10,960 -12,166 0
Change in NWC -1,675 -184 -205 -227 -252 -280 -310 -345 -383 -425 -471 -523 -581 -645 -715 -794 -882 -979 -1,086 -1,206 12,166
INVESTMENT CF
(1,000) -12,699 -184 -205 -227 -252 -280 -310 -345 -383 -425 -3,321 -523 -581 -645 -715 -794 -882 -979 -1,086 -1,206 12,166

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180 -180

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,051 1,315 1,308 1,373 1,541 1,531 1,521 1,576 1,631 -1,165 1,861 1,940 1,730 1,572 1,493 1,340 1,177 1,070 950 18,810

WACC 11%
NPV
(1,000) ($101)
IRR 10.91%
NWC: Previous year NWC * 1.11
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 * (1-0.40)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF
 EXHIBIT 9
YEAR % of sales 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
FISCAL YEAR 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037

INVESTMENT (1,000)
Land -3,720 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Building&Site -4,454 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Fixtures/Equipment -2,850 0 0 0 0 0 0 0 0 0 -2,850 0 0 0 0 0 0 0 0 0 0
Net Working Capital
(Cash/Inventory) -1,675 -1,709 -1,743 -1,778 -1,813 -1,849 -1,886 -1,924 -1,963 -2,002 -2,042 -2,083 -2,124 -2,167 -2,210 -2,254 -2,299 -2,345 -2,392 -2,440 0
Change in NWC -1,675 -34 -34 -35 -36 -36 -37 -38 -38 -39 -40 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440
INVESTMENT CF
(1,000) -12,699 -34 -34 -35 -36 -36 -37 -38 -38 -39 -2,890 -41 -42 -42 -43 -44 -45 -46 -47 -48 2,440

OPERATING (1,000)
Sales Revenue 0 20,800 22,880 25,168 27,685 30,453 31,671 32,938 34,256 35,626 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051 37,051
Cost of Sales 71% 0 14,768 16,245 17,869 19,656 21,622 22,487 23,386 24,322 25,294 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306 26,306

Salaries and Benefits 15% 0 3,172 3,489 3,838 4,222 4,644 4,830 5,023 5,224 5,433 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650 5,650
Advertising 0.50% 0 104 114 126 138 152 158 165 171 178 185 185 185 185 185 185 185 185 185 185 185
Operations 0.14% 0 29 32 35 39 43 44 46 48 50 52 52 52 52 52 52 52 52 52 52 52
Utilities 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Repairs and
Maintenance 0 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225 225
Other expenses 0.33% 0 69 76 83 91 100 105 109 113 118 122 122 122 122 122 122 122 122 122 122 122
Corporate Overhead 1% 0 208 229 252 277 305 317 329 343 356 371 371 371 371 371 371 371 371 371 371 371
EBITDA 0 2,000 2,245 2,515 2,811 3,137 3,281 3,430 3,585 3,747 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915 3,915

Building depreciation 0 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223 223
Fixure depreciation 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0 570 912 547.2 328.32 328.32 164.16 0 0 0 0
EBIT 0 1,207 1,110 1,745 2,260 2,586 2,894 3,207 3,362 3,524 3,692 3,122 2,780 3,144 3,363 3,363 3,527 3,692 3,692 3,692 3,692
Income Tax (40%) 0 483 444 698 904 1,034 1,157 1,283 1,345 1,409 1,477 1,249 1,112 1,258 1,345 1,345 1,411 1,477 1,477 1,477 1,477
Property Tax 0 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102 102
OPERATING CF
(1,000) 0 1,415 1,699 1,715 1,805 2,001 2,021 2,045 2,138 2,235 2,336 2,564 2,701 2,555 2,467 2,467 2,402 2,336 2,336 2,336 2,336

LOST REV OF OTHER

STORE CF (1,000) 0 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300 -300

TERMINAL CF
(excluding NWC) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 4,488

TOTAL CASH FLOW -12,699 1,082 1,365 1,380 1,470 1,665 1,684 1,708 1,800 1,896 -854 2,223 2,359 2,212 2,124 2,123 2,057 1,990 1,989 1,988 8,964

WACC 11%
NPV
(1,000) $593
IRR 11.58%
NWC: Previous year NWC * 1.02
NWC: Current year NWC - Previous year NWC
Investment CF: Sum of land + building&site + fixtures/equipment + change in NWC
Sales Revenue: Previous year sales revenue * growth rate (1.10 year 1-5; 1.04 year 6-10; 1.00 year 11-20)
Cost of Sales: Sales Revenue * 0.71
Salaries and Benefits: Sales Revenue * 0.15
Advertising Cost: Sales Revenue * 0.005
Operations Cost: Sales Revenue * 0.0014
Other Expenses: Sales revenue * 0.0033
Corporate Overhead Cost: Sales revenue * 0.01
EBITDA: Sales Revenue - Cost of sales - Salaries&Benefits - Advertising - Operations - Utilities - Repairs&Maintenance - Other expenses - Corporate OH
Fixture Depreciation: Original fixture value * 5-year-MACRS Year1-5 %
EBIT: EBITDA - Building depreciation - Fixture depreciation
Income Tax: EBIT * 0.40
Operating CF: EBITDA - Income Tax - Property Tax
Lost Revenue: 300 (post-tax value)
Terminal CF Excluding NWC: Salvage Value - (Salvage value - Book value)(0.4) = 5,000-(5,000-3,720)(0.40)
Total CF: Investment CF + Operating CF + Lost Revenue + Terminal CF