Corporate Valuation. Massari Mario
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Название: Corporate Valuation
Автор: Massari Mario
Издательство: Автор
Жанр: Зарубежная образовательная литература
isbn: 9781119003342
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● Revenues expected in t4 and t5 have been calculated based on the forecast for the volumes and prices in the reference market in the medium/long term.
Exhibit 2.6 Revenues as is vs. additional revenue from new commercial activities
Exhibits 2.7 2.8, and 2.9 represent, for each category product, the expected evolution in sales volumes, unitary prices, and revenues.
Exhibit 2.7 Evolution in sales volumes (€)
Exhibit 2.8 Evolution in unitary prices (€)
Exhibit 2.9 Evolution in revenues (€)
Assumptions on Industrial Costs
In the business planning process, Delta management has identified two types of industrial costs: variable costs and fixed costs.
Variable costs are linked to the industrial activity and can be ascribed, in particular, to:
● Raw materials
● Outsourced production
● Transportation
● Energy
● Direct labor costs
Variable costs account for over 70 percent of total operating costs each year (excluding the D&A), and have been quantified:
● Based on the expected production volumes for each product category (formulated to calculate the expected revenue as well)
● On a single product basis
● On the back of forecasts on the unitary cost for each production factor (cost per kilogram of raw material, cost per single manufacture, hourly cost for direct labor, etc.) (Exhibit 2.10)
Exhibit 2.10 Evolution in the unitary cost for each production factor
Fixed costs can be mainly ascribed to:
● Indirect labor costs
● Services
● Maintenance
● Waste management
The above costs have been forecast by adopting different logics and drivers than the ones used to determine variable costs:
● Indirect labor costs have been quantified based on the forecasts on number of employees and unitary average cost per employee.
● Costs for external services and maintenance costs have been set equal to a percentage of the revenues.
● Waste management costs have been assumed to grow at a yearly rate equal to expected inflation factor.
Overall, fixed costs do represent approximately 30 percent of total operating costs (excluded D&A) over the forecast years.
Assumptions on the Commercial Costs
In the business planning process, Delta management has also identified variable and fixed commercial costs.
Variable costs are made up by:
● Transportation
● Agency services
These have been estimated based on the hypotheses used to forecast the sales.
Fixed costs can be ascribed to:
● Inventory management
● Commercial area employees
Personnel cost has been quantified on the back of the forecasts for:
● Employees number
● Average mean cost per employee
The other costs, instead, have been assumed to grow each year at the expected inflation rate.
Overall, commercial costs amount to about 7 percent of revenue, for each year over the business plan period. Fixed costs represent more than 80 percent of commercial costs.
Assumptions on the Working Capital
Delta net invested capital is for the major part represented by working capital, defined as the algebraic sum of trade credits and inventory, net of trade debts. Over the business plan period:
● Trade credits have been quantified based on the average days sale outstanding.
● Trade debts have been quantified based on the average days payable outstanding.
● Inventory stock has been quantified based on the average days worth of inventory (Exhibit 2.11).
Exhibit 2.11 Hypotheses underlying trade credit, trade debts, and inventory
Conclusions
Delta case shows us some general rules applicable to business planning for industrial companies manufacturing standardized products:
● Usually, planning process starts from the forecasts on sales volume and market prices evolution, developed by independent third parties (like research institutes and the like). Management assumptions are instead the ones about:
● Company market share
● Revenue streams linked to the major clients
It is then good practice to estimate analytically the effects (on the market share, sales volumes, and prices) deriving from the competitive strategies that management wants to pursue over the business plan period:
● The major portion of the operating costs is represented by the industrial costs, whose quantification is driven in particular by the hypotheses on:
● Production volumes per product category (formulated to quantify the expected revenues)
● Unitary cost per production factor
● Usually, another important component of the operating costs is represented by the commercial costs, which can be variable (transportation costs, agency costs, etc.) or fixed (inventory management costs, sales force costs, etc.).
● The relevance of the R&D costs is a СКАЧАТЬ