I have chosen the firm BJs restaurants. I have already done the whole forecasting for the next 5 years on it.
The deliverables for this part of the project will be based on a complete DCF analysis, which should be conducted in the same workbook as the financial model in separate WACC and DCF spreadsheets. Use August 31, 2019, as your valuation date.If your company’s most recent fiscal year ends on August 31, 2018 or before, artificially change the fiscal year end to December 31, 2018.We want the valuation date to be less than 1 year after the end of the last fiscal year.
A) A spreadsheet showing your analysis to estimate your firm’s WACC should be included.This spreadsheet should be structured like the ones covered in class and should include estimates for the values of equity and debt and the returns of equity and debt.The expected return of the firm’s debt should be computed as the risk-free rate plus a spread based on EBIT/interest, using the table presented in class from the Damodaran web site.The expected return of the firm’s equity should be computed with the CAPM, where beta is estimated as covered in class with monthly returns over the 5-year period, ending with the valuation date.
Use 25.0% as the tax rate for WACC, 2.50% as the risk-free rate for the expected returns of debt and equity, and 5.50% as the market premium.To clarify, use the rate on the 13-week Treasury bill when estimating the firm’s beta and then use 2.50% as the risk-free rate when applying the CAPM to get the expected return of the firm’s equity.
B) A spreadsheet presenting the DCF valuation should be included as well.This spreadsheet will be structured similarly to the ones covered in class and should include a section that shows the free cash flows to the firm (and their components), terminal values, and their present values, and a section that provides a valuation analysis with rates, dates, various values and amounts, and then ending with the estimated price per share as of the valuation date.Assume terminal growth is 2.50 percent and that the forecast period is 5 years.
Important note: The spreadsheet should show estimates based on forecasting terminal value as a perpetuity.If we cover it in class, then the spreadsheet should also show estimates based on forecasting terminal value from an exit multiple, EV/EBITDA in particular.Assume the multiple for the firm remains unchanged moving forward.
I have uploaded the document that you need to work on. In addition I have also uploaded a model that you can use as a reference that we did in class for Ross Stores company. The model should be the same, just with the right information for the BJs Restaurants.