Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
March 2008
Table of Contents
Important Notice
Valuation Methodology
Valuation
Assumptions
10
18
Purpose of the study is to prepare financial projections based on financial statements and explanations
provided by the management of ABC School and conduct a valuation based on the projections to
determine an appropriate value for the School.
Valuation Methodology
Basis of Valuation
This DCF valuation method is based on the future earnings potential of the
company as it values the business by discounting the future cash flow stream from
the operations of the company at an appropriate discount rate . Key elements in
DCF valuation include:
Forecasted free cash flows
Terminal value
Net Present Value
The discount rate used is estimated by adjusting the risk free rate of return with a
premium for market and business risk and equity risk. This helps compel an indepth understanding of the business by deriving values of product lines,
businesses and transactions
Growth in Perpetuity
15%
16%
17%
18%
0%
152,411,088
141,693,582
132,270,282
123,924,244
1%
158,707,863
146,969,833
136,730,217
127,723,471
2%
165,973,373
152,999,835
141,784,809
131,997,601
3%
174,449,800
159,957,529
147,561,485
136,841,615
On the basis of the valuation methodology adopted, an estimated value of the ABC School System would
be PKR 153 Million based on a discount rate of 16% and a growth in perpetuity factor of 2%. A complete
range of values for various discount rate estimates and varied growth in perpetuity factors is provided as
above
Assumptions
This section of the report report provides an overview of the assumptions having a major impact on the
free cash flow method used in the valuation of ABC School.
The projected financial information is based on information derived from the historical results of ABC
School and explanations provided by the management. As part of the valuation exercise assumptions
used therein have been based on our best understanding of market dynamics and long term strategic
outlook.
Fixed Assets
PKR '000'
2,843
1,400
3,000
2,500
1,000
2,674
2,291
2,270
1,870
2,000
1,500
500
445
400
515
1,000
240
500
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
It has been assumed that major capital expenditure will be incurred during 2010, where the management
expects to increase the number of students by offering new classes for O levels, and increase the number of
sections for primary and secondary school - in light of this expansion the management plans to acquire new
rental premises, and the major capital expenditure will comprise of fixtures & fittings, computers, etc.
Capital expenditure in the remaining years comprises primarily purchase of replacement assets for obsolete
and depreciated equipment
Depreciation
WDV
Particulars
Depreciation Rates
2008
2009
2010
2011
2012
814,125
813,667
1,433,209
1,342,750
1,269,292
1,076,898
887,674
838,449
629,225
405,000
44,202
49,231
47,760
29,910
7,060
575,841
292,218
109,095
93,595
84,795
Electric Fittings
123,723
92,792
141,861
122,931
104,000
Books
207,764
155,823
103,882
51,941
2,842,554
2,291,405
2,674,256
2,270,351
1,870,146
Total
Particulars
Rates
10%
Office Equipment
20%
33%
33%
Electric Fittings
20%
Books
20%
For the purpose of financial projections we have assumed that depreciation is charged to income
applying straight line method and full year depreciation is charged in the year of purchase.
Revenue- Break up
PKR '000'
120,000
97,094
100,000
100,000
77,709
80,000
60,000
105,558
PKR '000'
120,000
2,541
80,000
60,614
60,000
47,022
40,000
20,000
40,000
2,100
8,600
20,000
36,322
2,310
8,600
15,250
49,704
59,918
2009
2010
3,075
2,795
13,875
16,650
80,424
85,834
2011
2012
2008
2009
2010
2011
2012
2008
Tuition fees
Admission Fees
Club activities
Total Revenue comprises of tuition fee, admission fee and income from club activities
Income from club activities constitutes of after school activities such as Karate, Yoga and Health training
programmes for students and their parents
Revenue has been projected based on our understanding of the market dynamics, past trends and
strategy of ABC School, the increase can be attributed to:
Number of students, which are assumed to increase with increase in number of sections and grades
Increase in admission fee and tuition fee per student, which is assumed to increase every two years
Increase in number of classes, which will increase with addition of one grade each year over the projected period
up to grade 11
Increase in number of sections per grade.
Revenue
Net Profit After Tax
PKR '000
PKR 000'
30,000
25,866
26,196
85,834
90,000
25,000
80,424
80,000
19,474
20,000
15,000
100,000
70,000
16,600
59,918
60,000
49,704
50,000
11,717
40,000
10,000
36,322
30,000
20,000
5,000
10,000
2008
2009
2010
2011
2012
2008
2010
2011
2012
PKR 000'
PKR 000'
3,500
3,075
2,795
3,000
18,000
16,650
15,250
16,000
13,875
2,541
2,500
2009
14,000
2,310
2,100
12,000
2,000
10,000
1,500
8,000
1,000
6,000
8,600
8,600
4,000
500
10
2,000
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
Tuition Fees
The table below illustrates tuition fees per student and increase in tuition fees per student for each grade
over the projected period
Particulars
2008
2009
2010
2011
2012
Particulars
2008
2009
2010
2011
2012
Pre Nursery 1
5,500
6,500
6,500
7,500
7,500
Pre Nursery 1
1,000
1,000
Pre Nursery 2
6,500
7,500
7,500
8,500
8,500
Pre Nursery 2
1,000
1,000
Nursery 1
6,500
7,500
7,500
8,500
8,500
Nursery 1
1,000
1,000
Nursery 2
7,000
8,000
8,000
9,000
9,000
Nursery 2
1,000
1,000
Prep
8,200
10,200
10,200
12,200
12,200
Prep
2,000
2,000
Grade 1
8,800
10,800
10,800
12,800
12,800
Grade 1
2,000
2,000
Grade 2
8,800
10,800
10,800
12,800
12,800
Grade 2
2,000
2,000
Grade 3
9,200
11,200
11,200
13,200
13,200
Grade 3
2,000
2,000
Grade 4
9,700
11,700
11,700
13,700
13,700
Grade 4
2,000
2,000
Grade 5
9,700
11,700
11,700
13,700
13,700
Grade 5
2,000
2,000
Grade 6
9,700
11,700
11,700
13,700
13,700
Grade 6
2,000
2,000
Grade 7
9,700
12,700
12,700
15,700
15,700
Grade 7
3,000
3,000
Grade 8
9,700
12,700
12,700
15,700
15,700
Grade 8
3,000
3,000
Grade 9
15,000
15,000
18,000
18,000
Grade 9
3,000
3,000
Grade 10
18,000
21,000
21,000
Grade 10
3,000
Grade 11
18,000
18,000
Grade 11
3,000
11
Admission Fees
No. of admissions per grade
Particulars
2008
2009
2010
2011
2012
Pre Nursery 1
20
20
20
20
20
Pre Nursery 2
20
20
20
20
20
150
PKR '000'
160
125
150
Nursery 1
10
10
10
10
10
Nursery 2
10
10
30
30
30
Prep
10
10
26
15
15
120
Grade 1
110
Grade 2
100
Grade 3
90
Grade 4
Grade 5
Grade 6
Grade 7
Grade 8
Grade 9
Grade 10
Grade 11
86
86
122
111
111
Total
140
130
100
80
2008
2009
2010
2011
2012
students leave
It has been assumed that no admissions will be
taken in grades 9, 10 and 11
12
Student Population
The tables below illustrate the total of number of sections and total number of students per grade
2009
2010
2011
2012
Pre Nursery 1
20
20
20
20
20
Pre Nursery 2
20
20
20
20
20
Nursery 1
20
20
20
20
20
Nursery 2
20
20
40
40
40
Prep
32
32
48
48
48
Grade 1
32
32
32
48
48
Grade 2
Grade 2
32
32
32
32
48
Grade 3
Grade 3
32
32
32
32
32
Grade 4
Grade 4
32
32
32
32
32
Grade 5
Grade 5
32
32
32
32
32
Grade 6
Grade 6
32
32
32
32
32
Grade 7
Grade 7
32
32
32
32
32
Grade 8
Grade 8
16
32
32
32
32
Grade 9
Grade 9
16
32
30
30
Grade 10
Grade 10
16
32
30
Grade 11
Grade 11
16
32
Particulars
2008
2009
2010
2011
2012
Pre Nursery 1
Pre Nursery 2
Nursery 1
Nursery 2
Prep
Grade 1
Particulars
13
As part of the expansion strategy the school plans to expand its operations by offering classes up to
O'levels and expand the student population for which it plans to increase the number of sections over the
projected period.
Administrative Expenses
Particulars
Assumptions
2008
2009
2010
2011
2012
16,806,000
20,697,000
26,754,300
33,208,722
38,944,085
Staff training
5,001,500
5,501,650
9,651,815
10,616,997
11,678,696
200,000
200,000
200,000
200,000
200,000
School function
1 % of revenue
470,216
606,140
777,094
970,941
1,055,582
3 % of revenue
1,410,648
1,818,420
2,331,282
2,912,823
3,166,746
Telephone charges
1 % of revenue
470,216
606,140
777,094
970,941
1,055,582
1.5 % of revenue
705,324
909,210
1,165,641
1,456,412
1,583,373
Internet expenses
0.1 % of revenue
47,022
60,614
77,709
97,094
105,558
Traveling expense
0.1 % of revenue
49,149
63,356
81,225
101,487
110,334
Software expenses
20,000
30,000
20,000
22,000
Security expenses
0.5 % of revenue
235,108
303,070
388,547
485,471
527,791
Postage expenses
0.1 % of revenue
47,022
60,614
77,709
97,094
105,558
Entertainment expenses
0.5 % of revenue
235,108
303,070
388,547
485,471
527,791
Conveyance
0.1 % of revenue
47,022
60,614
77,709
97,094
105,558
Water charges
0.5 % of revenue
235,108
303,070
388,547
485,471
527,791
1 % of revenue
470,216
606,140
777,094
970,941
1,055,582
25,000
25,000
25,000
25,000
25,000
Professional charges
1 % of revenue
470,216
606,140
777,094
970,941
1,055,582
10 % of cost of assets
359,050
383,050
523,050
487,507
526,507
Generator expense
231,867
255,053
280,559
308,615
339,476
Advertising expenses
0.5 % of revenue
235,108
303,070
388,547
485,471
527,791
Bank charges
6,041
7,285
15,940
25,566
38,841
Others / miscellaneous
1 % of revenue
470,216
606,140
777,094
970,941
1,055,582
Depreciation
747,949
791,149
1,017,149
848,905
915,205
28,995,105
35,075,996
47,748,748
57,299,902
65,256,013
Total
14
Administrative Expenses
Payroll
PKR '000'
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
-
PKR '000'
113
105
87
118
94
140
12,000
100
10,000
80
8,000
60
6,000
40
4,000
20
2,000
0
2008
2009
2010
Total Salaries
2011
14,000
120
2012
9,652
5,002
5,502
2008
2009
10,617
11,679
2010
2011
2012
Total Staff
management
plans
to
acquire
new
rental
15
Payroll Expenses
Total number of Teachers
80
71
70
Principle
63
60
Vice Principle
53
47
50
Particulars
Helpers
2008
2009
2010
2011
2012
125,000
137,500
151,250
166,375
183,013
60,000
66,000
72,600
79,860
87,846
8,000
8,800
9,680
10,648
11,713
12,000
13,200
14,520
15,972
17,569
40
Management Staff
30
Non-management Staff
7,500
8,250
9,075
9,983
10,981
20
Security Guards
6,500
7,150
7,865
8,652
9,517
10
Pre Nursery 1
18,000
19,800
21,780
23,958
26,354
Pre Nursery 2
18,000
19,800
21,780
23,958
26,354
Nursery 1
18,000
19,800
21,780
23,958
26,354
Nursery 2
18,000
19,800
21,780
23,958
26,354
Prep
18,000
19,800
21,780
23,958
26,354
Grade 1
18,000
19,800
21,780
23,958
26,354
Grade 2
18,000
19,800
21,780
23,958
26,354
Grade 3
18,000
19,800
21,780
23,958
26,354
Grade 4
18,000
19,800
21,780
23,958
26,354
Grade 5
18,000
19,800
21,780
23,958
26,354
Grade 6
18,000
19,800
21,780
23,958
26,354
Grade 7
20,000
22,000
24,200
26,620
29,282
Grade 8
20,000
22,000
24,200
26,620
29,282
Grade 9
35,000
38,500
42,350
46,585
Grade 10
40,000
44,000
48,400
Grade 11
45,000
49,500
2008
2009
2010
2011
2012
50,000
38,944
40,000
33,209
26,754
30,000
20,697
20,000
16,806
10,000
2008
2009
2010
2011
2012
16
2008
2009
2010
2011
2012
2,842,554
2,291,405
2,674,256
2,270,351
1,870,146
14,570,334
31,880,398
51,132,803
77,681,584
104,540,232
786,937
951,974
1,295,917
1,555,138
1,771,070
15,357,271
32,832,372
52,428,720
79,236,722
106,311,302
Total Assets
18,199,825
35,123,777
55,102,976
81,507,073
108,181,448
Accrued salaries
1,400,500
1,724,750
2,229,525
2,767,394
3,245,340
1,400,500
1,724,750
2,229,525
2,767,394
3,245,340
5,082,102
16,799,324
33,399,026
52,873,450
78,739,679
11,717,222
16,599,702
19,474,424
25,866,229
26,196,428
Closing Balance
16,799,324
33,399,026
52,873,450
78,739,679
104,936,107
Total Liabilities
18,199,825
35,123,777
55,102,976
81,507,073
108,181,448
Current Assets
Cash & Bank Balances
Deposits, Prepayments & Other Receivables
Capital Account
Opening balance
Add: Excess of receipts over expenditure
Less: Drawing & Taxes
17
2008
2009
2010
2011
2012
36,321,600
49,704,000
59,918,400
80,424,000
85,833,600
Admission fee
8,600,000
8,600,000
15,250,000
13,875,000
16,650,000
2,100,000
2,310,000
2,541,000
2,795,100
3,074,610
Total Revenue
47,021,600
60,614,000
77,709,400
97,094,100
105,558,210
Cost of Services
28,995,105
35,075,996
47,748,748
57,299,902
65,256,013
18,026,495
25,538,004
29,960,652
39,794,198
40,302,197
6,309,273
8,938,301
10,486,228
13,927,969
14,105,769
11,717,222
16,599,702
19,474,424
25,866,229
26,196,428
Revenue
Tuition Fee
Tax expense
Net Profit After Tax
18
2008
2009
2010
2011
2012
18,026,495
25,538,004
29,960,652
39,794,198
40,302,197
747,949
791,149
1,017,149
848,905
915,205
18,774,444
26,329,153
30,977,801
40,643,103
41,217,402
(308,788)
(165,037)
(343,943)
(259,222)
(215,932)
(283,493)
(165,037)
(343,943)
(259,222)
(215,932)
Liabilities
(9,293,300)
324,250
504,775
537,869
477,947
Tax payments
(6,309,273)
(8,938,301)
(10,486,228)
(13,927,969)
(14,105,769)
2,888,378
17,550,064
20,652,405
26,993,781
27,373,648
(400,000)
(240,000)
(1,400,000)
(445,000)
(515,000)
(400,000)
(240,000)
(1,400,000)
(445,000)
(515,000)
2,488,378
17,310,064
19,252,405
26,548,781
26,858,648
12,081,956
14,570,334
31,880,398
51,132,803
77,681,584
14,570,334
31,880,398
51,132,803
77,681,584
104,540,232
25,295
19
2008
2009
2010
2011
2012
18,026,495
25,538,004
29,960,652
39,794,198
40,302,197
747,949
791,149
1,017,149
848,905
915,205
18,774,444
26,329,153
30,977,801
40,643,103
41,217,402
(6,309,273)
(8,938,301)
(10,486,228)
(13,927,969)
(14,105,769)
(400,000)
(240,000)
(1,400,000)
(445,000)
(515,000)
12,065,171
17,150,851
19,091,573
26,270,134
26,596,633
Add:
Depreciation
Gross Cash Flows
Less:
Cash Taxes Paid
Capital Expenditure
Free Cash Flows
Terminal Value
189,975,949
12,065,171
17,150,851
19,091,573
26,270,134
216,572,582
152,999,835
20