FIN 522: Dollar general Case Study

Create an Excel workbook and word document to completely answer the questions for the case. Please no plagiarism, write answers in your own words. Be sure to complete the optional section!
assignment_4_dollar_general_1017.pdf

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FIN 522
Financial Administration
Assignment #4
Fall 2017
Valuation: General Dollar_bids_for_Family_Dollar
Completing this assignment is required. All assignments may be completed individually or by working
with ONE other person (see Assignment Write-up Guide for details).
Create an excel workbook and a word document that addresses the questions below, using the format of
the Assignment Write-up Guide. All case exhibits have been provided for you in Excel. Note that there is
an optional additional piece to this assignment.
Dollar General Case Questions.
Use the case exhibits unless instructed otherwise.
1. Project an EBITDA for Dollar General for the next financial reporting period (January 2016)
2. Calculate the Enterprise value to EBITDA ratio (EnV:EBITDA) for Dollar General (DG) using
your forecasted EBITDA and a Market Cap of $19.7 Billion (market value of the firm on
September 10, 2015). Calculate ?net cash? using the January 2015 reported Balance sheet items
for DG.
3. Forecast an EBITDA for Dollar Tree for the next reporting period (January 2016) assuming the
acquisition of Family Dollar does NOT occur. How does this value compare to the ~$13Billion
market cap that Dollar Tree was trading at before the merger. Use the short-cut valuation method
and use the EnV:EBITDA ratio you calculated for Dollar General (since they are in the same
industry) to calculate the Enterprise Value for Dollar Tree based on your 2016 forecasted
EBITDA value for Dollar Tree.
Optional. Doing this correctly will add up an additional 35 points to your Midterm Score.
1. Calculate a rigorous Free-Cash-Flow valuation of Equity Value of Dollar General based on the
exhibits provided
a. Have at least a 4-year explicit period
i. Justify the length of the explicit period
b. Calculate a terminal value
c. Discount using the industry average WACC of 7.22%
d. Use a long-term growth rate of 0%
e. Use a ?net cash? value from January 2015 reported Balance Sheet numbers (millions of
US Dollars) to convert your Enterprise value calculated by the FCF method to an Equity
Value (note that it is a negative value) for this case only.
f. How does this value compare to Dollar General?s market capitalization value of $19.7
Billion (as of September 10, 2015)?
i. Explain the variance
Fin522 / Faley / Fall 2017
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