Case 2 : Teuer Furniture (A)

Discounted Cash Flow Valuation

Section - A
Group 4

PGP/19/016 Deepika Dudhey

PGP/19/102 Shilpi Jain
PGP/19/148 Manan Agrawal
PGP/19/176 Thilak Kumar K
on
These spreadsheet exhibits relate to the case Teuer Furniture (A): Discounted Cash Flow Valuation, Case
#KEL778.

©2015 by the Kellogg School of Management at Northwestern University. This case was prepared by
Professor Mitchell A. Petersen. Teuer Furniture is a fictional company whose profile was created based on
data from real industry leaders. Cases are developed solely as the basis for class discussion. Cases are not
intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective
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 low Valuation, Case

as prepared by
as created based on
cussion. Cases are not
e or ineffective
545-7685 (or 617-783-
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Exhibit 1: Teuer Furnitures Showrooms and Square Footage

Stores Total SQ FT Total

Opened Stores Opened SQ FT
2003 1 1 17,200 17,200 40
2004 3 4 17,600 70,000
35
2005 4 8 18,500 144,000
2006 5 13 21,100 249,500 30
2007 6 19 22,100 382,100 25
2008 2 21 15,500 413,100
20
2009 1 22 14,500 427,600
2010 2 24 14,700 457,000 15
2011 2 26 15,400 487,800 10
2012 3 29 16,300 536,700
5
2013 2 31 16,000 568,700
2014 2 33 16,000 600,700 0
2003 2005
2015 2 35 15,000 630,700

763655
764480 1290960
48900
40 700,000
35 600,000
30
500,000
25
400,000
20
300,000
15
200,000
10
5 100,000

0 0
2003 2005 2007 2009 2011 2013 2015
Number of Showrooms Total Square Feet
Exhibit 2: Economic Indicators: GDP and Furniture Sales Growth
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
CPI index 180.9 184.3 190.3 196.8 201.8 210.0 210.2 215.9 219.2 225.7 229.6 233.5 237.7 242.3 247.4 252.1 256.6 261.3
Inflation (CPI) 1.9% 3.3% 3.4% 2.5% 4.1% 0.1% 2.7% 1.5% 3.0% 1.7% 1.7% 1.8% 1.9% 2.1% 1.9% 1.8% 1.8%
GDP (T$) 10,642 11,142 11,853 12,623 13,377 14,029 14,292 13,974 14,499 15,076 15,685 16,238 17,049 18,012 19,021 20,078 21,101
GDP growth 4.7% 6.4% 6.5% 6.0% 4.9% 1.9% -2.2% 3.8% 4.0% 4.0% 3.5% 5.0% 5.6% 5.6% 5.6% 5.1%
Furniture sales ($B) 94.44 96.7 103.8 109.1 112.8 111.1 99.6 86.3 87.3 90.1 93.1 95.9 98.6 101.2 103.6 105.9 108.0 110.2
Furniture sales growth 2.4% 7.3% 5.2% 3.4% -1.5% -10.4% -13.4% 1.2% 3.2% 3.4% 3.0% 2.8% 2.6% 2.4% 2.2% 2.0% 2.0%

10.0%

5.0%

0.0%
2003 2005 2007 2009 2011 2013 2015 2017

-5.0%

-10.0%

-15.0%

GDP Growth Furniture Sales Growth Inflation (CPI)

Exhibit 3: Teuer Furniture Income Statement
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Sales 2,057 10,415 26,701 51,540 79,191 90,680 111,451 134,093 148,218
Cost of goods sold -1,463 -7,057 -17,424 -30,730 -43,834 -47,290 -49,068 -55,487 -61,955
Selling, general and admin -410 -1,812 -4,958 -9,230 -13,576 -14,679 -16,471 -18,698 -21,253
Advertising -203 -1,019 -2,411 -4,588 -6,585 -7,532 -8,367 -9,545 -10,744
Depreciation -72 -307 -669 -1,264 -2,075 -2,188 -2,032 -1,820 -1,450
Lease -250 -1,080 -2,330 -4,240 -6,770 -7,380 -7,712 -8,450 -9,320
Corporate expense -185 -729 -1,602 -3,092 -4,751 -5,441 -5,573 -6,705 -7,411
Taxable income -526 -1,588 -2,693 -1,604 1,600 6,170 22,229 33,389 36,086
Tax loss carry forward 526 2,114 4,807 6,411 4,811 0 0 0 0
Taxes 0 0 0 0 0 -543 -8,892 -13,356 -14,434
Net income -526 -1,588 -2,693 -1,604 1,600 5,626 13,337 20,033 21,651

Parameters:
Corporate tax rate 40%

Sales Growth 406.44% 156.37% 93.03% 53.65% 14.51% 22.91% 20.32% 10.53%
Exhibit 4: Teuer Furniture Balance Sheet
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Assets
Accounts Receivable 0 751 3,479 8,675 16,946 25,272 29,059 36,625 42,421 48,200
Inventory 671 3,151 8,216 15,125 20,908 21,715 24,868 26,808 29,216 33,343
Total Current Assets 671 3,902 11,695 23,800 37,853 46,987 53,927 63,433 71,637 81,543
PPE 358 1,461 2,969 5,270 8,065 6,914 5,119 3,839 3,142 3,920
Total Assets 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Liabilities and Equity

Accounts Payable 236 1,158 2,781 5,119 7,228 7,767 8,277 9,133 9,986 11,364
Accrued Expenses 29 145 358 658 958 1,055 1,203 1,359 1,519 1,682
Total Current Liabilities 265 1,303 3,139 5,777 8,186 8,822 9,480 10,493 11,505 13,046
Debt 0 0 0 0 0 0 0 0 0 0
Equity 764 4,061 11,525 23,293 37,732 45,079 49,565 56,779 63,274 72,417
Total Liabilities and Equity 1,029 5,364 14,663 29,070 45,918 53,900 59,046 67,272 74,779 85,463

Balance sheet check

Exhibit 5: Teuer Furniture Income Statement for Individual Showrooms
# Avg Size 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
2003 1 17,200 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
Sales 2,057 3,754 5,224 6,148 6,341 5,503 5,636 5,871 6,034 6,235 6,430 6,618 6,799 6,971 7,133 7,299
CGS 1,463 2,309 3,018 2,394 2,753 2,311 2,194 2,150 2,416 2,476 2,554 2,629 2,700 2,769 2,833 2,899
SGA 410 640 857 856 815 765 767 687 791 848 874 900 925 948 970 993
Advertising 203 334 399 434 422 423 391 401 457 449 463 477 490 502 514 526
Depreciation 72 72 72 72 72 0 0 0 65 65 65 65 65 0 0 0
Lease 250 250 250 250 250 250 302 302 302 302 302 302 365 365 365 365
2004 3 17,600 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Sales 6,661 11,907 15,158 16,488 15,446 16,187 17,279 17,869 18,464 19,041 19,599 20,134 20,643 21,123 21,615
CGS 4,748 7,428 7,894 7,216 6,031 6,675 6,691 7,176 7,330 7,559 7,781 7,993 8,195 8,386 8,581
SGA 1,171 2,148 2,631 2,323 2,239 2,224 2,395 2,319 2,511 2,590 2,665 2,738 2,807 2,873 2,940
Advertising 685 971 1,266 1,213 1,235 1,241 1,245 1,287 1,329 1,371 1,411 1,450 1,486 1,521 1,556
Depreciation 235 235 235 235 235 0 0 0 187 187 187 187 187 0 0
Lease 830 830 830 830 830 830 1,003 1,003 1,003 1,003 1,003 1,003 1,212 1,212 1,212
2005 4 18,500 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Sales 9,570 16,651 19,785 20,951 22,847 24,451 24,499 25,315 26,108 26,872 27,605 28,303 28,962 29,636
CGS 6,978 10,917 11,430 8,499 9,387 9,857 9,042 10,050 10,365 10,668 10,959 11,236 11,498 11,765
SGA 1,953 2,977 3,371 3,039 3,021 3,228 3,693 3,443 3,551 3,655 3,754 3,849 3,939 4,030
Advertising 1,041 1,488 1,587 1,598 1,605 1,645 1,793 1,823 1,880 1,935 1,988 2,038 2,085 2,134
Depreciation 363 363 363 363 363 0 0 0 301 301 301 301 301 0
Lease 1,250 1,250 1,250 1,250 1,250 1,250 1,510 1,510 1,510 1,510 1,510 1,510 1,825 1,510
2006 5 21,100 1 2 3 4 5 6 7 8 9 10 11 12 13
Sales 13,583 21,142 23,592 29,702 34,105 34,824 35,984 37,110 38,197 39,239 40,231 41,167 42,125
CGS 9,526 11,229 13,594 9,902 13,259 13,932 14,286 14,733 15,164 15,578 15,972 16,343 16,724
SGA 2,767 4,016 4,237 3,780 4,895 4,946 4,894 5,047 5,195 5,337 5,471 5,599 5,729
Advertising 1,400 1,784 1,964 2,014 2,327 2,287 2,591 2,672 2,750 2,825 2,897 2,964 3,033
Depreciation 594 594 594 594 594 0 0 0 490 490 490 490 490
Lease 1,910 1,910 1,910 1,910 1,910 1,910 2,309 2,309 2,309 2,309 2,309 2,309 2,791
2007 6 22,100 1 2 3 4 5 6 7 8 9 10 11 12
Sales 15,435 22,001 30,466 39,628 43,541 45,542 46,967 48,343 49,662 50,917 52,102 53,315
CGS 11,205 14,801 16,422 15,232 17,856 18,080 18,646 19,192 19,716 20,214 20,685 21,166
SGA 3,050 3,878 5,471 5,166 5,917 6,194 6,388 6,575 6,754 6,925 7,086 7,251
Advertising 1,578 1,986 2,458 2,748 3,109 3,279 3,382 3,481 3,576 3,666 3,751 3,839
Depreciation 812 812 812 812 812 0 0 0 655 655 655 655
Lease 2,530 2,530 2,530 2,530 2,530 2,530 3,058 3,058 3,058 3,058 3,058 3,058
2008 2 15,500 1 2 3 4 5 6 7 8 9 10 11
Sales 3,187 5,176 7,244 9,257 10,461 10,921 11,241 11,547 11,839 12,115 12,397
CGS 2,053 3,467 4,421 3,764 4,153 4,336 4,462 4,584 4,700 4,809 4,921
SGA 522 951 1,225 1,243 1,423 1,485 1,529 1,570 1,610 1,648 1,686
Advertising 326 499 598 675 753 786 809 831 852 872 893
Depreciation 185 185 185 185 185 0 0 0 152 152 152
Lease 610 610 610 610 610 610 737 737 737 737 737
2009 1 14,500 1 2 3 4 5 6 7 8 9 10
Sales 1,437 2,507 3,540 4,481 5,054 5,266 5,410 5,546 5,676 5,808
CGS 1,021 1,652 1,887 1,779 2,007 2,091 2,148 2,202 2,253 2,306
SGA 257 480 615 609 687 716 736 754 772 790
Advertising 158 227 303 323 364 379 389 399 409 418
Depreciation 79 79 79 79 79 0 0 0 64 64
Lease 280 280 280 280 280 280 338 338 338 338
2010 2 14,700 1 2 3 4 5 6 7 8 9
Sales 3,008 5,300 7,288 9,207 10,364 10,778 11,050 11,307 11,570
CGS 2,226 3,526 4,096 3,655 4,115 4,279 4,387 4,489 4,593
SGA 623 1,028 1,261 1,252 1,410 1,466 1,503 1,538 1,574
Advertising 353 473 598 663 746 776 796 814 833
Depreciation 150 150 150 150 150 0 0 0 123
Lease 565 565 565 565 565 565 683 683 683
2011 2 15,400 1 2 3 4 5 6 7 8
Sales 3,354 5,879 8,069 10,174 11,430 11,863 12,139 12,421
CGS 2,357 3,745 4,535 4,039 4,538 4,709 4,819 4,931
SGA 701 1,076 1,396 1,384 1,555 1,613 1,651 1,689
Advertising 358 523 662 733 823 854 874 894
Depreciation 160 160 160 160 160 0 0 0
Lease 610 610 610 610 610 610 737 610
2012 3 16,300 1 2 3 4 5 6 7
Sales 5,379 9,411 12,891 16,223 18,191 18,842 19,280
CGS 3,814 5,995 7,245 6,441 7,222 7,480 7,654
SGA 1,038 1,722 2,230 2,206 2,474 2,562 2,622
Advertising 570 838 1,057 1,168 1,310 1,357 1,388
Depreciation 259 259 259 259 259 0 0
Lease 1,000 1,000 1,000 1,000 1,000 1,000 1,209
2013 2 16,000 1 2 3 4 5 6
Sales 3,622 6,326 8,647 10,861 12,155 12,590
CGS 2,568 4,029 4,860 4,312 4,825 4,998
SGA 699 1,158 1,496 1,477 1,653 1,712
Advertising 384 563 709 782 875 906
Depreciation 172 172 172 172 172 0
Lease 668 668 668 668 668 668
2014 2 16,000 1 2 3 4 5
Sales 3,731 6,503 8,872 11,122 12,447
CGS 2,097 2,582 3,522 4,416 4,941
SGA 720 1,190 1,535 1,513 1,693
Advertising 720 1,190 1,535 1,513 1,693
Depreciation 175 175 175 175 175
Lease 682 682 682 682 682
2015 2 15,000 1 2 3 4
Sales 3,597 6,257 8,520 10,680
CGS 1,428 2,484 3,382 4,240
SGA 694 1,145 1,474 1,453
Advertising 381 557 699 769
Depreciation 167 167 167 167
Lease 652 652 652 652

Parameters:
Lease rate (2013) 20.88
Lease inflation 2.0%
Exhibit 6: Teuer Furniture Balance Sheet for Individual Showrooms
# Avg Size 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
2003 1 17,200 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Cap expenditure 358 324
Accts receivable 751 1,187 1,665 1,975 2,040 1,700 1,745 1,742 1,902 2,020 2,083 2,144 2,203 2,259 2,311
Inventory 671 1,090 1,330 1,206 1,167 980 972 1,082 1,027 1,090 1,216 1,251 1,285 1,318 1,349 1,380
Accts payable 236 396 448 405 403 350 345 370 369 390 416 428 440 451 462 473
Accr expenses 29 49 62 61 61 53 54 57 58 58 64 66 68 70 71 73
PPE 260 195 130 65 0
2004 3 17,600 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Cap expenditure 1,175 936
Accts receivable 2,292 3,870 5,029 5,526 5,276 5,599 5,612 5,691 5,982 9,064 9,329 9,584 9,826 10,055
Inventory 2,061 3,590 4,304 3,352 2,851 3,042 3,248 3,397 3,619 3,598 3,704 3,805 3,901 3,992 4,085
Accts payable 762 1,255 1,421 1,124 1,025 1,090 1,124 1,139 1,153 1,232 1,268 1,303 1,336 1,367 1,399
Accr expenses 95 158 193 173 162 162 175 177 179 190 196 201 206 211 216
936 748 561 374 187 0
2005 4 18,500 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Cap expenditure 1,814 1,506
Accts receivable 3,140 5,508 6,296 6,231 7,149 7,751 7,950 8,202 8,459 8,707 8,944 9,170 9,384
Inventory 3,296 5,271 4,640 3,975 4,075 4,427 4,354 5,114 4,934 5,078 5,217 5,349 5,473 5,600
Accts payable 1,078 1,760 1,742 1,381 1,523 1,572 1,565 1,631 1,689 1,739 1,786 1,832 1,874 1,918
Accr expenses 138 212 240 203 240 244 251 259 261 268 276 283 289 296
1,506 1,205 904 603 301 0
2006 5 21,100 0 1 2 3 4 5 6 7 8 9 10 11 12
Cap expenditure 2,971 2,450
Accts receivable 4,433 6,593 7,974 10,040 10,908 11,761 11,659 12,024 12,376 12,713 13,035 13,338
Inventory 4,344 6,518 6,635 5,870 6,689 6,854 6,348 7,013 7,218 7,415 7,603 7,779 7,960
Accts payable 1,533 2,227 2,181 1,889 2,165 2,325 2,377 2,401 2,472 2,539 2,603 2,664 2,726
Accr expenses 193 272 300 291 337 343 362 371 381 392 402 411 421
2,450 1,960 1,470 980 490
2007 6 22,100 0 1 2 3 4 5 6 7 8 9 10 11
Cap expenditure 4,058 3,277
Accts receivable 4,817 6,829 9,849 12,400 13,920 14,756 15,217 15,663 16,091 16,497 16,881
Inventory 5,232 6,246 8,710 7,320 8,121 9,022 8,876 9,135 9,385 9,622 9,846 10,075
Accts payable 1,732 2,480 2,712 2,631 2,712 2,919 3,039 3,128 3,214 3,295 3,372 3,450
Accr expenses 213 293 362 381 436 435 469 483 496 508 520 532
3,277 2,622 1,966 1,311
2008 2 15,500 0 1 2 3 4 5 6 7 8 9 10
Cap expenditure 924 761
Accts receivable 1,048 1,758 2,212 2,905 3,389 3,538 3,642 3,741 3,836 3,925
Inventory 1,028 1,711 2,147 1,727 1,911 2,064 2,124 2,182 2,237 2,289 2,343
Accts payable 349 547 662 586 690 707 727 747 766 784 802
Accr expenses 43 72 88 94 101 109 112 115 118 121 124
924 739 554 370 185 0 761 609 457
2009 1 14,500 0 1 2 3 4 5 6 7 8 9
Cap expenditure 394 322
Accts receivable 484 840 1,191 1,452 1,638 1,706 1,753 1,797 1,839
Inventory 488 882 881 823 955 995 1,022 1,048 1,073 1,097
Accts payable 171 261 327 281 327 341 350 359 367 376
Accr expenses 21 34 43 44 50 53 54 55 57 58
394 315 236 158 79 0 322 258
2010 2 14,700 0 1 2 3 4 5 6 7 8
Cap expenditure 752 616
Accts receivable 956 1,787 2,361 2,983 3,358 3,492 3,580 3,664
Inventory 1,013 1,787 1,913 1,740 1,959 2,037 2,088 2,137 2,186
Accts payable 348 577 683 596 671 697 715 732 749
Accr expenses 44 71 91 92 103 108 110 113 116
752 602 451 301 150 0 616
2011 2 15,400 0 1 2 3 4 5 6 7
Cap expenditure 798
Accts receivable 1,093 1,905 2,614 3,296 3,703 3,844 3,933
Inventory 1,067 1,795 2,158 1,923 2,160 2,242 2,294 2,347
Accts payable 387 623 739 658 740 768 786 804
Accr expenses 47 76 99 102 114 118 121 124
798 638 479 319 160 0
2012 3 16,300 0 1 2 3 4 5 6
Cap expenditure 1,293
Accts receivable 1,743 3,049 4,177 5,256 5,894 6,105
Inventory 1,708 2,854 3,448 3,066 3,438 3,561 3,643
Accts payable 617 977 1,181 1,050 1,177 1,219 1,248
Accr expenses 79 123 158 162 182 188 192
1,293 1,034 776 517 259 0
2013 2 16,000 0 1 2 3 4 5
Cap expenditure 860
Accts receivable 1,174 2,050 2,802 3,519 3,938
Inventory 1,918 2,313 2,053 2,297 2,379
Accts payable 657 792 703 787 815
Accr expenses 83 106 108 121 126
860 688 516 344 172 0
2014 2 16,000 0 1 2 3 4
Cap expenditure 876
Accts receivable 1,209 2,107 2,875 3,604
Inventory 1,229 1,677 2,102 2,352
Accts payable 421 574 720 805
Accr expenses 114 147 145 163
876 701 526 350 175
2015 2 15,000 0 1 2 3
Cap expenditure 837
Accts receivable 1,165 2,027 2,760
Inventory 1,182 1,610 2,018
Accts payable 405 551 691
Accr expenses 73 97 103
837 670 502 335
Exhibit 7: Teuer Furniture Cash Flow Assets
2003 2004 2005 2006 2007 2008 2009
Sales 2,057 10,415 26,701 51,540 79,191 90,680
- Costs -2,582 -12,003 -29,394 -53,144 -77,591 -84,510
- Taxes 0 0 0 0 0 -543
Net income 0 -526 -1,588 -2,693 -1,604 1,600 5,626
- Capital expenditure -358 -1,175 -1,814 -2,971 -4,058 -924 -394
+ Depreciation 0 72 307 669 1,264 2,075 2,188
- Increase in NWC -406 -2,193 -5,957 -9,467 -11,645 -8,498 -6,281
Cash flow to assets -764 -3,823 -9,052 -14,461 -16,043 -5,747 1,139

5.4033317 2.7158396 1.5892057 1.2300833 0.7297668 0.7391534 1.3523104

 2010 2011 2012
111,451 134,093 148,218
-89,222 -100,704 -112,132
-8,892 -13,356 -14,434
13,337 20,033 21,651
-752 -1,122 -2,229
2,032 1,820 1,450
-8,494 -7,192 -8,365
6,123 13,539 12,508

0.8466941 1.1630737
Exhibit 8: Forecasting Sales Revenue and Costs
Year 1 2 3 4 5 6 7 8
Sales growth 2003 73.6% 34.6% 19.5% 15.1% 0.2% 1.2% 1.0%
2004 72.9% 29.2% 21.4% 8.1% 3.6% 3.4% 0.0%
2005 76.6% 32.6% 22.2% 7.8% 3.7% -3.1%
2006 73.8% 28.8% 24.4% 11.3% -1.3%
2007 64.5% 36.8% 26.1% 6.3%
2008 60.5% 35.6% 23.6%
2009 69.0% 36.6%
2010 70.4%
2011
Average 70.2% 33.5% 22.9% 9.7% 1.5% 0.3%

Year 1 2 3 4 5 6 7 8
CGS 2003 71.1% 61.5% 57.8% 38.9% 43.4% 42.0% 38.9% 36.6%
2004 71.3% 62.4% 52.1% 43.8% 39.0% 41.2% 38.7% 40.2%
2005 72.9% 65.6% 57.8% 40.6% 41.1% 40.3% 36.9%
2006 70.1% 53.1% 57.6% 33.3% 38.9% 40.0%
2007 72.6% 67.3% 53.9% 38.4% 41.0%
2008 64.4% 67.0% 61.0% 40.7%
2009 71.0% 65.9% 53.3%
2010 74.0% 66.5%
2011 70.3%
Average 70.9% 63.7% 56.2% 39.7% 39.9% 39.5% 38.6%

Year 1 2 3 4 5 6 7 8
SGA 2003 19.9% 17.1% 16.4% 13.9% 12.9% 13.9% 13.6% 11.7%
2004 17.6% 18.0% 17.4% 14.1% 14.5% 13.7% 13.9% 13.0%
2005 20.4% 17.9% 17.0% 14.5% 13.2% 13.2% 15.1%
2006 20.4% 19.0% 18.0% 12.7% 14.4% 14.2%
2007 19.8% 17.6% 18.0% 13.0% 13.6%
2008 16.4% 18.4% 16.9% 13.4%
2009 17.9% 19.2% 17.4%
 2010 20.7% 19.4%
2011 20.9%
Average 19.3% 18.3% 17.3% 13.6% 13.6% 13.5% 13.4%

Year 1 2 3 4 5 6 7 8
Advertising 2003 9.9% 8.9% 7.6% 7.1% 6.7% 7.7% 6.9% 6.8%
2004 10.3% 8.2% 8.3% 7.4% 8.0% 7.7% 7.2% 7.2%
2005 10.9% 8.9% 8.0% 7.6% 7.0% 6.7% 7.3%
2006 10.3% 8.4% 8.3% 6.8% 6.8% 6.6%
2007 10.2% 9.0% 8.1% 6.9% 7.1%
2008 10.2% 9.6% 8.3% 7.3%
2009 11.0% 9.1% 8.6%
2010 11.7% 8.9%
2011 10.7%
Average 10.6% 8.9% 8.2% 7.2%
 9
-0.6%

9
40.0%

9
13.1%
 9
7.6%
Exhibit 9: Forecasting Investment
Year 1 2 3 4 5 6 7 8
Accounts Receivable 2003 36.5% 31.6% 31.9% 32.1% 32.2% 30.9% 31.0% 29.7%
2004 34.4% 32.5% 33.2% 33.5% 34.2% 34.6% 32.5% 31.9%
2005 32.8% 33.1% 31.8% 29.7% 31.3% 31.7% 32.4%
2006 32.6% 31.2% 33.8% 33.8% 32.0% 33.8%
2007 31.2% 31.0% 32.3% 31.3% 32.0%
2008 32.9% 34.0% 30.5% 31.4%
2009 33.7% 33.5% 33.6%
2010 31.8% 33.7%
2011 32.6%
Average 32.4%

Year 1 2 3 4 5 6 7 8
Inventory 2003 45.9% 47.2% 44.0% 50.4% 42.4% 42.4% 44.3% 50.3%
2004 43.4% 48.3% 54.5% 46.4% 47.3% 45.6% 48.5% 47.3%
2005 47.2% 48.3% 40.6% 46.8% 43.4% 44.9% 48.2%
2006 45.6% 58.0% 48.8% 59.3% 50.4% 49.2%
2007 46.7% 42.2% 53.0% 48.1% 45.5%
2008 50.1% 49.4% 48.6% 45.9%
2009 47.8% 53.4% 46.7%
2010 45.5% 50.7%
2011 45.3%
Average 47.6%

Year 1 2 3 4 5 6 7 8
Accounts Payable 2003 16.1% 17.2% 14.8% 16.9% 14.6% 15.2% 15.7% 17.2%
2004 16.1% 16.9% 18.0% 15.6% 17.0% 16.3% 16.8% 15.9%
2005 15.4% 16.1% 15.2% 16.2% 16.2% 15.9% 17.3%
2006 16.1% 19.8% 16.0% 19.1% 16.3% 16.7%
2007 15.5% 16.8% 16.5% 17.3% 15.2%
2008 17.0% 15.8% 15.0% 15.6%
2009 16.8% 15.8% 17.3%
 2010 15.6% 16.4%
2011 16.4%
Average 16.3%

Year 1 2 3 4 5 6 7 8
Accrued Expenses 2003 4.7% 5.1% 4.9% 4.7% 4.9% 4.5% 4.6% 5.2%
2004 5.1% 5.1% 4.9% 4.9% 4.7% 4.7% 4.8% 4.9%
2005 4.6% 4.7% 4.8% 4.4% 5.2% 5.0% 4.6%
2006 4.6% 4.7% 4.8% 5.0% 4.7% 4.7%
2007 4.6% 5.0% 4.6% 4.8% 4.8%
2008 5.1% 5.0% 4.8% 4.9%
2009 5.2% 4.8% 4.7%
2010 4.5% 4.7%
2011 4.4%
Average 4.8%

Nominal Real
Construction costs 2003 20.8 25.9
2004 22.3 26.8
2005 24.5 28.6
2006 28.2 32.0
2007 30.6 33.5
2008 29.8 32.6
2009 27.2 28.9
2010 25.6 26.8
2011 25.9 26.4
2012 26.4 26.4
2013 26.9 26.4
2014 27.4 26.4
2015 27.9 26.4

Nominal Real
Refresh cost 2003 90.6% 74.0%
2004 79.6% 66.0%
Average 70.0%
 9
31.5%

9
42.5%

9
15.3%
 9
4.7%
Exhibit 10: Forecasting Parameters
1 2 3 4 5 6 7
Sales growth 70.2% 33.5% 22.9% 9.7% 1.5% 0.3%
CGS (% sales) 70.9% 63.7% 56.2% 39.7% 39.7% 39.7% 39.7%
SGA (% sales, excluding dep & advertising) 19.3% 18.3% 17.3% 13.6% 13.6% 13.6% 13.6%
Advertising (% sales) 10.6% 8.9% 8.2% 7.2% 7.2% 7.2% 7.2%
Accounts Receivable (% sales) 32.4%
Inventory (% next year's CGS) 47.6%
Accounts Payable (% next year's CGS) 16.3%
Accrued expenses (next year's SGA adv) 4.8%
Depreciation (years) 5
Refresh cost 70.0%
Corporate tax rate 40.0%
Corporate expenses 5.0%
Discount rate 12.1%
Long-term growth rate 3.5%
Shares outstanding (K) 9,945
Teuer Furniture Pro Forma Income Statement
2012 2013 2014 2015 2016 2017 2018 2019
Sales 148,218 165,028 181,941 199,623 217,575 231,545 242,363 251,183
CGS -61,955 69,809 76,952 83,512 87,805 91,925 96,219 99,721
SGA (exc adv & dep) -21,253 23,296 25,691 28,136 30,421 32,112 33,277 34,161
Advertising -10,744 12,238 13,464 15,061 16,596 17,674 18,247 18,882
Depreciation -1,450 1,084 1,373 1,959 2,631 2,559 2,178 1,828
Lease (stores) -9,320 10,719 11,915 12,724 13,497 13,825 14,267 14,516
Corp Expense (inc lease/adv) -7,411 8,251 9,097 9,981 10,879 11,577 12,118 12,559
Tax calculation -14,434
Tax loss carry forwards 0
Taxes -14,434 15,852 17,380 19,300 22,298 24,749 26,423 27,807
Net income 21,651 23,778 26,069 28,950 33,447 37,124 39,634 41,710

Parameters:
Corporate tax rate 40%
Corporate expenses 5%
Teuer Furniture Pro Forma Balance Sheet
2012 2013 2014 2015 2016 2017 2018
Assets
Accounts Receivable 48,200 53,469 61,843 67,657 73,555 78,158 81,736
Inventory 33,343 35,407 38,754 41,116 43,756 45,800 47,467
Total Current Assets 81,543 88,876 100,597 108,772 117,311 123,959 129,203
Cash (balance) 0 17,226 29,982 49,198 76,905 110,055 146,624
PPE 3,920 5,203 7,155 9,310 7,440 5,203 3,641
Total Assets 85,463 111,305 137,734 167,281 201,656 239,216 279,469

Liabilities and Equity

Accounts Payable 11,364 12,247 12,772 13,449 14,462 15,085 15,632
Accrued Expenses 1,682 2,862 2,698 2,617 2,531 2,345 2,417
Total Current Liabilities 13,046 15,109 15,469 16,066 16,994 17,430 18,049
Debt 0 0 0 0 0 0 0
Equity 72,417 96,196 122,265 151,215 184,662 221,786 261,420
Total Liabilities and Equity 85,463 111,305 137,734 167,281 201,656 239,216 279,469

Balance sheet check (A=L+E)

Teuer Furniture Pro Forma Cash Flow Assets
2012 2013 2014 2015 2016 2017
Sales 148,218 165,028 181,941 199,623 217,575 231,545
- Costs -112,132 -125,398 -138,492 -151,373 -161,829 -169,672
- Taxes -14,434 -15,852 -17,380 -19,300 -22,298 -24,749
Net income 21,651 23,778 26,069 28,950 33,447 37,124
- Capital expenditure -2,229 -2,367 -3,325 -4,114 -761 -322
+ Depreciation 1,450 1,084 1,373 1,959 2,631 2,559
- Increase in NWC -8,365 -5,269 -11,361 -7,579 -7,610 -6,212
Cash flow assets 12,508 17,226 12,756 19,216 27,707 33,149
1 0.89 0.80 0.71 0.63 0.56
12,508.10 15,367.05 10,150.53 13,641.07 17,545.66 18,726.10
PV ₹ 328,148.97
Terminal value ₹ 440,109.09

Asset value 328,149

Share value 33.00
Parameters:

Asset discount rate 12.1%

Long-term growth rate 3.5%
Shareholders (#) 187
Shares outstanding (K) 9,945
 2018 2012 2013 2014 2015 2016 2017 2018
242,363 TCA 81,543 88,876 100,597 108,772 117,311 123,959 129,203
-176,306 TCL 13,046 15,109 15,469 16,066 16,994 17,430 18,049
-26,423 WC 68,497 73,766 85,128 92,707 100,317 106,528 111,154
39,634 Increase in NWC 5,269 11,361 7,579 7,610 6,212 4,626
-616
2,178
-4,626
36,569
0.50
240,210.5