ThinPanels, LLC

Subject:AccountingPrice: Bought3

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ThinPanels, LLC. (TP) is on the leading edge of roof-integrated solar panels technology. Currently, TP is a private, closely held company, but the founders may consider a future IPO.

 

Once established, the company moved to a well-equipped $20-million facility that will depreciate straight-line to zero-book value over 4 years. In its first year of operations (2020), TP sold 4,000 units at $24,000 each. TP entered into forward contracts to keep AVC at 50% of the price and designed long-term compensation packages to keep GS&A at $10 million. The company expects sales to grow at 20% in 2021 and 25% in 2022. TP expects a 6% longterm FCF growth rate after 2022. TP plans to keep its prices fixed and use new technological advances to enhance its product to stay competitive and increase its market share.

 

Analytics indicate that effective operations require the following practices:

• 3-month sales cash

• 2-month sales accounts receivable

• 2-month sales inventory

• 1-month sales accounts payable

• 1-month sales accrued expenses

 

The CFO invests all extra funds in an aggressive but hedged, highly diversified portfolio that can be tapped when needed. The portfolio is not required for operations, and, for valuation purposes, it is considered a non-operating asset. The portfolio yields no income, and the prices of its underlying securities determine its return. The portfolio acts as a buffer to absorb retained earnings and keep current assets and liabilities at the desired levels.

 

The founders started TP with an equity fund of $60 million, then issued and sold a privately held 5-year, 10% bond for $40 million at face value. TP considers its capital structure of 60% equity and 40% debt ideal and plans to maintain it. TP has a Beta of 1.5(?RE =1.5), risk- free rate of return is 4%, and the market risk premium is 6%.

Accordingly, its WACC is 10.2%. The company has a dividend payout ratio of 10% and a federal-to-state tax of 40%.

 

Required

1. Prepare balance sheets and income statements for 2020-2022

2. Calculate 2021-2022 FCF, ROIC, and EVA

 

 

FIN665_Fall 21_MT Name:

 

1	Balance Sheet		ThinPanels, LLC
2	ASSETS	2020	2021	2022
3	Cash (3-month)
4	Accounts Receivable (2-month)
5	Inventory (2-month)
6	Total Current Operating Assets
7	Invested Portfolio
8	Total Current Assets
9	Gross PPE
10	Accumulated Depreciation
11	Net PPE
12	Total Assets
13	Liabilities and Shareholders' Equity
14	Accounts Payable (1-month)
15	Accrued Expenses (1-month)
16	Total Current Liabilities
17	Long-term Debt
18	Total Liabilities
19	Paid In Capital (Founders Equity)
20	Retained Earnings
21	Total Common Equity
22	Total Liab. & O E
23	Income Statement
24	Sales
25	Cost of Goods Sold
26	Gross Profit
27	Selling & Admin. Expense
28	EBITDA
29	Depreciation
30	Operating Profit (EBIT)
31	Interest Expense
32	Earnings Before Taxes (EBT)
33	Taxes @ 40%
34	Net income
35	Dividend
36	Change in Retained Earning
37	Free cash flow
38	Operating Profit
39	Tax on Operating Profit
40	NOPAT
41	Operating Current Assets
42	Operating Current Liabilities
43	NOWC
44	Net PPE
45	Total net operating capital
46	New Investment in Operating Capital (?IC)
47	FCF=NOPAT+D- ?IC
48	ROIC
49	EVA