# Hello. I need help with company valuation case: Directions

### Question Description:

Hello. I need help with company valuation case: Directions – First you need to get the average increase in net income. Second, determine what income is predicted to be for 2015 using the first step. Use the income as given for 2014 and increase/decrease predicted net income for 2015. Third, you should find 6 items that need normalization entries. Use this format for this part of the case: Item Amount Add or (subtract from NI) Fourth, to normalize the income statement you should begin with forecasted income for 2015 then add or subtract the normalization items above. Fifth, use a capitalization rate of 20% to determine the value of the company. The remaining requirements are pretty much self-explanatory Please upload only two documents. One excel worksheet and one Word document. Don’t forget to create, using word, the journal entries and the trend analysis question. I have included in attachments the valuation case, balance sheet and income statement. also I included a Sample BV Report that shows examples of valuation reports…this is only for example purposes, this report does not have to be that detailed Awesome Case (1).doc The Awesome Products Business Valuation Case Awesome is a small closely held company operating in the United States. Assume you are in the early stages of preparing a business valuation on Awesome Products to assist a potential purchaser.. Included in the case is a copy of Awesome Products, Inc. Unadjusted Income Statement and Balance Sheet and Operating Expense detail for the periods ending December 31st; all numbers are in thousands. All questions on this case use the attached data as basis. Instructions: Complete each of the exercises. As always you will be graded on both content (correctness) and organization of your answers. 1. Based on the information given, prepare the normalization entries for the years 2010 2014. Explain your reasons for each normalization entry. 2. Using the data you created in #1, a. Prepare normalized and common size balance sheets for each year from 2010 – 2014; and (you may want to use excel but please remember do not go too far over to the right. This makes it very difficult to print out) b. Prepare a normalized and common size income statement for each year from 2010 – 2014. (you may want to use excel but please remember do not go to far over to the right. This makes it very difficult to print out) 3. Compute the following ratios listed using the normalized data for each of the 5 years. Ratios to be calculated are: 1. Growth Ratios 1. Sales Growth Percentage 2. Earnings Growth Percentage 11. Cost Control Ratios 1. Cost of Sales/Sales Industry Average n/a n/a n/a 2. Gross Margin or Profit 41.2 3. Operating Expenses to Sales 37.4 4. Operating Margin or Profit 111. Turnover Ratios 1. Receivable Turnover 2. Inventory Turnover 1v. Profitability Ratios 1. Return on Assets 2. Return on Equity v. Risk 1. Debt/Equity Percentage 2. Current Ratio 3. Interest Coverage 3.8 101.7 3.5 7.4 16.8 0.5 1.7 3.5 4. Trends: Analyze the ratios you calculated for each of the 5 years. Analyze and explain why you believe they are indicative of issues (positive or negative) to your planned valuation of Awesome Products Inc. 5. Using the normalized income statements developed above, estimate future income. State why you believe the method you selected for estimating future is the most appropriate for this company. 6. Based on the above exercises and a capitalization rate of 20%, calculate, using the interest capitalization method, the value of Awesome Products, Inc. Information needed for normalization entries You have discovered the following information after reviewing the financial statements and other company documents, and interviewing management. 1. Net Sales During the period 2010 through 2014, the company has expanded their product line and opened new stores. This caused the increase in sales during this period. An analysis of the information shows the f