Flash Memory, Inc

哈佛個案研究 Flash Memory, Inc.

Agenda

1

第二組： Case Brief + Case Study Q1 & Q2

2

第一組： Case Study Q3 & Q4 & Q5

3

第三組： Case Study Q6 & Q7

Background  In May of 2010, Browne, CFO of Flash Memory, Inc., was preparing the company's investing and financing plans for the next 3 years  From its founding, Flash had focused on solid state drives (SSDs).  SSDs were particularly well suited for use in smart phones, laptop computers, and netbooks. Selling of these products were expected to drive the growth. $m

Background  Flash competed in product markets that reflected fast growth, continuous technological change, short product life cycles, changing customer wants and needs, a large number of competitors, and a high level of rivalry within the industry.  These factors combined to produce low profit margins and a continual need for additional working capital, which adversely impacted Flash’s financial position and its ability to finance important investment opportunities.

Background  Short product life cycles of Flash Inc.’s products: the first year

• Realized 70% of their max sales level

the second & third year • Max sales were reached and maintained

the fourth year and after • Rapidly decaying sales

the sixth year • The products were obsolete

 Response to the risk of technological changes: By aggressive spending on research and development to improve its existing product lines and add new ones.

Background  The success of Flash’s memory components had resulted in compounded average annual sales growth of 7.6% per year since 2007 (Exhibit 1), and its investment in current assets had grown even faster, at a 12.2% compounded average annual rate over the same period (Exhibit 2).  Flash had used Notes Payable obtained from the company’s commercial bank which was secured by the pledge of Accounts Receivable, to fund this growth of working capital.  But recently, the note payable balances reached the 70% of Account Receivable which is the limitation of funding agreement.

Background Exhibit 1

Income Statements, 2007 - 2009 ($000s except earnings per share)

　 Net sales 　　　　　 Cost of goods sold 　 Gross margin 　　　 Research and development Selling, general and administrative Operating income Interest expense Other income (expenses) Income before income taxes Income taxes (a) Net income Earnings per share

2007

2008

2009

Avg. CAGR = 7.57% $77,131 4.96% $80,953 10.25% $89,250 $62,519 $68,382 $72,424 (18.94%) $14,612 (15.53%) $12,571 (18.85%) $16,826

$3,726 $6,594 (5.56%) $4,292

$4,133 $7,536 (1.11%) $902

$4,416 $7,458 (5.55%) $4,952

$480 -$39

$652 -$27

$735 -$35

$3,773

$223

$4,182

$1,509 (2.94%) $2,264

$89 (0.17%) $134

$1.52

$0.09

Tax Rate was 40% $1,673 (2.81%) $2,509 Income before Taxes * (1-T)

$1.68

　 　 　 　 (a) In years 2007 and after, Flash's effective combined federal and state income tax rate was 40%.

Net Income Number of Share Outstanding

Background Exhibit 2

Balance Sheets, 2007 - 2009 ($000s except number of shares outstanding)

　 　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment

　 2007

December 31, 2008 $2,536 $10,988 $9,592 13.03% $309 $23,425

$2,218 $12,864 $11,072 $324 $26,478

$5,306 $792 $4,514

$6,116 $1,174 $4,942

$27,939

$31,420

$3,084 (60.3% of AR) $6,620 $563 $151 $478 (39%) $10,896

$4,268 (69% of AR) $8,873 $591 $9 $502 (45.33%) $14,243

Common stock at par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

$15 $7,980 $9,048 $17,043

$15 $7,980 (9048+134) $9,182 $17,177

Total liabilities & shareholders' equity

$27,939

$31,420

Total assets Accounts payable Notes payable (a) Accrued expenses Income taxes payable (b) Other current liabilities Total current liabilities

　 2009

11.30%

$2,934 $14,671 0.4% of Sales $11,509 Avg. CAGR = 12.17% $357 $29,471 $7,282 $1,633 $5,649 Total Current Assets + Net Fixed Assets $35,120

Approach 70% limitation

0.73% of Sales

$3,929 10% of income taxes expense (69% of AR) $10,132 $652 0.62% of Sales $167 $554 Remark: (43.95%) $15,434 (a) Secured by accounts receivable. (b) To avoid a penalty for underpayment of income taxes, $15 Flash made equal estimated tax payments quarterly on the $7,980 15th of April, June, September, and December of each (9182+2509) $11,691 year. The total of these four quarterly payments was $19,686 required to equal at least the lesser of (a) 90% of the taxes that would actually be incurred in the same year, or (b) 100% of the taxes due on income of the prior year. $35,120

Background  As general economic conditions improved in 2010, Flash’s sales increased rapidly. This rapid sales growth had also required a large increase in Working Capital, and Internal Cash Flow had not been sufficient to fund this increase in receivables and inventories.  The factoring group would lend up to 90% of a company’s existing Accounts Receivable balances, but this group would also monitor Flash's credit extension policies and accounts receivable collection activities more rigorously.  The Interest Rate charged which increases from prime + 4% to prime + 6% on the total outstanding loan balance to Flash, based off the May 2010 prime rate of 3.25%.

Growth Projections  A forecast of full-year 2010 (Y2010 全年預測 )

 Sales of $120 million ( 銷售為 1.2 億美元 )  Corresponding, Cost of Goods Sold to be $97.32 million ( 銷售成本 9732 萬美元 )

 A forecast of Current asset investment necessary to support the level of sales & cost of goods sold, based on the sales in recent months.

 Cash had been estimated at 3.3% of sales. ( 現金估計為佔銷售額的 3.3 ％ )  Accounts Receivable ( 應收賬款 ) were based on an estimated 60 days sales outstanding. ( 應 收賬款周轉天數為 60 Days)  Inventory forecast ( 存貨預測 ), holding only 52 days of COGS in inventory. ( 計算基準為以 52 天的銷貨成本為估算 ) Cash Accounts receivable Inventories Prepaid expenses Total current assets

$ 3,960,000 = 3.3% * 120,000,000 $ 19,726,000 = 60/365 * 120,000,000 $ 13,865,000 = 52/365 * 97,320,000 $ $480,000 = 0.4% of Sales $ 38,031,000

Growth Projections  A forecast beyond Y2010 (Y2010 之後預測 )

 Sales of the company‘s existing products would reach $144 M in 2011  Sales would maintain at that level of $144 M in 2012  Sales would decline to $128 million in 2013 and $105 million in 2014.  Less competitive due to absent new products

 A summary of important forecast assumptions ( 預測假設總結如 Exhibit 3)  Purchases made up 60% of COGS, and use 30 days as a purchasing cycle. ( 採購以銷貨成本的 60 ％ , 30 天採購周期計算 )  R&D expenditures approximately 5% of sales. ( 研發支出約佔銷售 額的 5 ％ )  Necessary Capital Expenditures to support existing product lines and sales growth during 2010 ~ 2012 year were $900,000 per year. ( 必要資本支出，每年 90 萬 )  Depreciation Expense, was calculated as 7.5% of the beginning of year balance of PP&E. ( 折舊費用，按年初 PP&E 餘額的 7.5 ％計 算 ).

Exhibit 3 　

Key Forecasting Assumptions and Relationships for 2010 Through 2012 　

Line Item

Assumption or Ratio

Cost of goods sold Research and development Selling, general and administrative Interest expense Other income (expenses)

81.10% of Sales 5.0% of Sales 8.36% of Sales Beginning of Year Debt Balance × Interest Rate $50,000 of expense each year

Cash Accounts receivable Inventories Prepaid expenses Property, plant & equipment at cost Accumulated depreciation

3.3% of sales 60 Days Sales Outstanding 52 Days of Cost of Good Sold 0.4% of Sales Beginning PP&E at cost + Capital Expenditures Beginning A/D + 7.5% of beginning PP&E at cost

Accounts payable Purchases Accrued expenses Income taxes payable Other current liabilities

30 Days of Purchases 60% of Cost of Goods Sold 0.73% of Sales 10% of Income Taxes Expense 0.62% of Sales

Investment Opportunity  CFO/Hathaway Browne‘s responsibility was :

 Financing for the growth of Flash's Existing Product Lines  Financing for New Investments.  Board to have discussion, evaluation and Acceptance or Rejection.

 A proposal for a major new product line : ( 新產品線的提案 )

 Expect to significant impact on the company's sales, profits, and cash flows.  Developed for the past 9 months, and spent $400,000 taking the product from the Concept Stage -> Working Prototypes -> Testing Stage

 Confidence from Project Sponsors :    

Generate sales of at least $21.6 M in 2011. Generate sales of $28 M in 2012 and 2013. Falling off to $11 M in 2014 and $5 M in 2015. Gross margins of 21% due to superior to existing memory products.

Investment Opportunity  However, requiring large Investments and Expenditures for the new Product. ( 新產品需要大量投資和支出 )  $ 2.2 M cost for new plant and equipment. ( 購買新廠房與設備 )  Depreciated straight-line to Zero salvage value over its five-year life. ( 五年折舊為零殘值 )  Depreciated Expense all flowed to COGS, and estimate that COGS would be 79% of Sales. ( 折舊費計入銷貨成本，預估將佔銷售 額的 79%)  Expected Net Working Capital would be 26.15% of sales. ( 淨營運 資金預期將佔銷售額的 26.15 ％ )  Initial investment in Equipment and Net Working Capital would occur in 2010. ( 設備和淨營運資金的初始投資將在 2010 年發 生)  SG&A expenses were expected to be the same percent of sales as 2009. ( 銷售與一般行政支出預計與 2009 年相同 )  Planned a one-time cost $300,000 for Advertising and Promotion in 2011. ( 一次性 30 萬美元的廣告和促銷活動 )

Financing Alternatives  A private sale of common stock ( 股權融資 ) to a large institutional investor  Issue 300,000 shares at a price of $25.00 per share.  Expect to receive about $23.00 per share after deducting relevant Fee and Expenses Browne needed to analyze this proposal with a select group of competitors as Exhibit 4 to compare the Forecast Results in with and without new equity offering.  Browne think 6% Spread between Long-Term Treasury Bonds vs. expected Return of Stock Market, use this number as Market Risk Premium. Issue 91 - day Treasury bills 10 - year Treasury bonds 10 - year Corporate bonds 10 - year Corporate bonds 10 - year Corporate bonds

Bond Rating

Yield to Maturity

AA A BBB

0.17 % 3.70 % 4.40 % 4.72 % 6.24 %

 Rely the Reinvestment of Flash‘s Earnings to fund growth. ( 依靠收益再投資 )  Company‘s profit margins were relatively low, would not provide sufficient funding to support forecasted sales of $120 M in 2010 and subsequent increases.  Board think debt financing was greater than target ratio (18%) of Debt-to-Capital Ratio.

Exhibit 4

Selected Financial Information for Flash Memory, Inc., and Selected Competitors, 2007 through 2009

　

　

　

　 　 Sales ($ millions) EPS ($) Dividend per share ($) Closing stock price ($) Shares outstanding (millions) Book Value per share ($) ROE Capitalization (book value) Debt Equity Beta coefficient

　

Flash Memory, Inc. 2007

2008

2009

77 1.52 -n/a 1.492 11.43 13.28%

81 0.09 -n/a 1.492 11.52 0.78%

89 1.68 -n/a 1.492 13.20 12.75%

28% 72%

34% 66%

34% 66% n/a

　

　

　

　

30-Apr-10 (a) 　 　 　 　 　 　 　 　 　 　 　 　

　

　

　

Micron Technology 2007

2008

2009

5,688 -0.42 -7.25 769.1 10.08 -4.13%

5,841 -2.10 -2.64 772.5 8.00 -26.21%

4,803 -2.29 -10.56 800.7 5.81 -39.43%

24% 76%

31% 69%

40% 60%

　 30-Apr-10 (a)

1.46 9.35 847.6 6.61 21.00% 33% 67% 1.25

　

　

SanDisk Corporation

　

　

　

STEC, Inc.

　 Sales ($ millions) EPS ($) Dividend per share ($) Closing stock price ($) Shares outstanding (millions) Book Value per share ($) ROE Capitalization (book value) Debt Equity Beta coefficient 　

　

3,986 0.84 -33.17 227.7 22.64 3.70%

3,351 -8.82 -9.60 225.3 15.27 -57.74%

3,567 1.83 -28.99 227.4 17.18 10.63%

15% 85%

22% 78%

21% 79%

　

　

　

　 3.71 　 39.84 229.3 18.13 17.87% 　 19% 81% 1.36

　

189 0.20 -8.74 49.8 3.72 5.40%

227 0.09 -4.26 50.0 3.63 2.36%

354 1.47 -16.34 49.4 5.65 26.06%

0% 100%

0% 100%

0% 100%

　

　

1.29 13.90 50.3 5.48 18.90%

　

0% 100% 1.00

Q1 Briefly describe the Flash Memory Inc.

A) Its Products: • Computer & Electronic device’s Memory market • 80% from SSD • 20% from Other high performance electronic components B) Business Model • Sell SSD and Memory Module to QEMs, Distributor and Retails • Pledge its Account Receivable for gaining External Financial (70% of it’s A/R) C) Its Competitors • Intel / Samsung / Micron / SanDisk / STEC D) Important Characteristics the Memory Industry • Fast growth • Continuous technological change • Short product life cycles (1st year reach 70% of Max Sale; 2nd & 3rd year reach Max Sale; 4th rapidly decay, and face out at 6th year) • Changing customer wants and needs • A large number of competitors & high level of rivalry within the Industry • Low profit margins & a continual need of additional Working Capital

Q2 Forecast of 2010~2012 w/o Invest New Product Line Income Statement Forecast of 2010 ~ 2012 ($000s except EPS) 　

　

　

　 Actual 　 2009　

Sales Cost of goods sold Gross margin Research and development Selling, general and administrative Operating income

　

　

　

2010

　

Forecast 　 2011

$89,250 $72,424 $16,826

$120,000 $97,320 $22,680

$144,000 $116,784 $27,216

$4,416 $7,458 $4,952

$6,000 $10,032 $6,648

$7,200 $12,038 $7,978

2012　 Remark $144,000　各年度預測值，來自內文 $116,784　 81.1% of Sales = 120M * 0.811 $27,216　 Sales - COGS $7,200　 5% of Sales $12,038　 8.36% of sales $7,978　 Sales - COGS - OE

$735 -$35

$937 -$50

$1,323 -$50

　以前一年的負債 ( 應付票據 ) * $1,5659.25% -$50　 50,000 of expense each year

Income before income taxes

$4,182

$5,661

$6,604

$6,363

Income taxes Net income (Net income rate) Earnings per share

$1,673 $2,509 2.81% $1.68

$2,264 $3,396 2.83% $2.28

$2,642 $3,963 2.75% $2.66

$2,545　 Tax Rate was 40% $3,818　 Income before Taxes * (1-T) 2.65% $2.56　 Net Income / No. of Share

Interest expense Other income (expenses)

Q2 Forecast of 2010~2012 w/o Invest New Product Line Balance Sheet Forecast of 2010 ~ 2012 ($000s except shares outstanding) 　

　

　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment Total assets Accounts payable Notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities Common stock at $0.01 per share par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

　

　

　 Actual 　 2009　

　

　

Forecast 2010

2011

$2,934 $14,671 $11,509 $357 $29,471

$3,960 $19,726 $13,865 $480 $38,031

$4,752 $23,671 $16,638 $576 $45,637

$7,282 $1,633 $5,649

$8,182 $2,179 $6,003

$9,082 $2,793 $6,290

$35,120

$44,034

$51,926

$3,929

$4,799

$5,759

$10,132 (72.5%AR) $14,306 (71.5%AR) $16,914 $652 $876 $1,051 $167 $226 $264 $554 $744 $893 $15,434 $20,951 $24,881 $15 $7,980

$15 $7,980

$15 $7,980

$11,691 $19,686

$15,087 $23,082

$19,050 $27,045

　

2012　 Remark $4,752　 3.3% of sales 為每年現金預估 $23,671　以 60 天週轉天數計算； A/R = 60 / 365 * Sale $16,638　以 52 天的銷貨成本當庫存計算； 52 / 365 * COGS $576　 0.4% of sales 為預付費用 $45,637　總流動資產為上述總和 $9,982　 Beginning PP&E Cost + Capital Expenditures 90 萬 $3,474　 Beginning A/D + 7.5% of Beginning PP&E Cost $6,508　淨 PP&E Cost ( 淨固定資產 ) 為 PP&E - A/D $52,145　 Step 1 ：計算總資產為流動資產 + 固定資產 $5,759　以 30 天為採購周期、 COGS 的 60% 為採購金額 (56.3%AR) $13,325　 Step 4 ：外部所需融資 = 總負債 - 其他剩餘項目 $1,051　 0.73% of sales $255　 10% of income taxes expense $893　 0.62% of Sales $21,282　 Step 3 ：計算總負債 = 總資產 - 總股東權益 $15 $7,980 　 Last Year Retained Earnings + This Year Next $22,868Income $30,863　 Step 2 ：計算總股東權益 ( 上述 3 項總和 )

Q2 Forecast of 2010~2012 w/o Invest New Product Line Balance Sheet Forecast of 2010 ~ 2012 ($000s except shares outstanding) 　

　

　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment Total assets

　

　

　 Actual 　 2009　

　

　

Forecast 2010

2011

$2,934 $14,671 $11,509 $357 $29,471

$3,960 $19,726 $13,865 $480 $38,031

$4,752 $23,671 $16,638 $576 $45,637

$7,282 $1,633 $5,649

$8,182 $2,179 $6,003

$9,082 $2,793 $6,290

$35,120

$44,034

$51,926

Accounts payable Notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities

$3,929 $10,132 $652 $167 $554 $15,434

Common stock at $0.01 per share par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

$15 $7,980 $11,691 $19,686

　

2012　 Remark $4,752　 3.3% of sales 為每年現金預估 $23,671　以 60 天週轉天數計算； A/R = 60 / 365 * Sale $16,638　以 52 天的銷貨成本當庫存計算； 52 / 365 * COGS $576　 0.4% of sales 為預付費用 $45,637　總流動資產為上述總和 $9,982　 Beginning PP&E Cost + Capital Expenditures 90 萬 $3,474　 Beginning A/D + 7.5% of Beginning PP&E Cost $6,508　淨 PP&E Cost ( 淨固定資產 ) 為 PP&E - A/D $52,145　 Step 1 ：計算總資產為流動資產 + 固定資產

a) PP&E : 8182 = 7282 + 900

Step 1, 先計算總資產

b) Accumulated Depreciation : 2179 = 1633 + 7282 * 0.075

　總資產 = 負債 + 股東權益 = 總流動資產 + 固定資

Q2 Forecast of 2010~2012 w/o Invest New Product Line Balance Sheet Forecast of 2010 ~ 2012 ($000s except shares outstanding) 　

　

　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment Total assets Accounts payable Notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities Common stock at $0.01 per share par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

　

　

　 Actual 　 2009　

　

　

Forecast

　

2012　 Remark

2010

2011

$2,934 $14,671 $11,509 $357 $29,471

$3,960 $19,726 $13,865 $480 $38,031

$4,752 $23,671 $16,638 $576 $45,637

$4,752 $23,671 $16,638 $576 $45,637

$7,282 $1,633 $5,649

$8,182 $2,179 $6,003

$9,082 $2,793 $6,290

$9,982 $3,474 $6,508

$35,120

$44,034

$51,926

$52,145

Retained Earnings : 15087 = 11691 (2009 Retained Earning) + 3396 (2010 net income)

$3,929 $10,132 $652 $167 $554 $15,434 $15 $7,980 $11,691 $19,686

$15 $7,980 $15,087 $23,082

$15 $7,980 $19,050 $27,045

Step 2, 計算股東權益

$15 $7,980 　 Last Year Retained Earnings + This Year Next $22,868Income $30,863　 Step 2 ：計算總股東權益 ( 上述 3 項總和 )

Q2 Forecast of 2010~2012 w/o Invest New Product Line Balance Sheet Forecast of 2010 ~ 2012 ($000s except shares outstanding) 　

　

　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment

　

　

　 Actual 　 2009　

　

　

Forecast 2010

2011

$2,934 $14,671 $11,509 $357 $29,471

$3,960 $19,726 $13,865 $480 $38,031

$4,752 $23,671 $16,638 $576 $45,637

$7,282 $1,633 $5,649

$8,182 $2,179 $6,003

　

2012　 Remark $4,752 $23,671 $16,638 $576 $45,637

Accounts$9,082 Payable : $9,982 4799 = (30/365) $2,793 * (0.6 * 97320) $3,474 $6,290

$6,508

Step 3, 計算總負債 以及 內容他項金額 Total assets

$35,120

$44,034

$51,926

$52,145

Accounts payable Notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities

$3,929 $10,132 $652 $167 $554 $15,434

$4,799

$5,759

$876 $226 $744 $20,951

$1,051 $264 $893 $24,881

$1,051　 0.73% of sales $255　 10% of income taxes expense $893　 0.62% of Sales $21,282　 Step 3 ：計算總負債 = 總資產 - 總股東權益

Common stock at $0.01 per share par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

$15 $7,980 $11,691 $19,686

$15 $7,980 $15,087 $23,082

$15 $7,980 $19,050 $27,045

$15 $7,980 $22,868 $30,863

Total liabilities & shareholders' equity

$35,120

$44,034

$51,926

$52,145

$5,759　以 30 天為採購周期、 COGS 的 60% 為採購金額

Q2 Forecast of 2010~2012 w/o Invest New Product Line Balance Sheet Forecast of 2010 ~ 2012 ($000s except shares outstanding) 　

　

　 Cash Accounts receivable Inventories Prepaid expenses Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment

　

　

　 Actual 　 2009　

　

　

Forecast 2010

2011

$2,934 $14,671 $11,509 $357 $29,471

$3,960 $19,726 $13,865 $480 $38,031

$4,752 $23,671 $16,638 $576 $45,637

$7,282 $1,633 $5,649

$8,182 $2,179 $6,003

　

2012　 Remark $4,752 $23,671 $16,638 $576 $45,637

Notes Payable $9,082: $9,982 總負債 –$2,793 負債裡的他項金額 $3,474 $6,290

$6,508

Step 4, 計算 Notes Payable, 即外部融資 Total assets Accounts payable

$35,120

$44,034

$51,926

$3,929

$4,799

$5,759

Notes payable Accrued expenses Income taxes payable Other current liabilities Total current liabilities

$10,132 (72.5%AR) $14,306 (71.5%AR) $16,914 $652 $876 $1,051 $167 $226 $264 $554 $744 $893 $15,434 $20,951 $24,881

Common stock at $0.01 per share par value Paid in capital in excess of par value Retained earnings Total shareholders' equity

$15 $7,980 $11,691 $19,686

$15 $7,980 $15,087 $23,082

$15 $7,980 $19,050 $27,045

$52,145 $5,759 (56.3%AR) $13,325　 Step 4 ：外部所需融資 = 總負債 - 其他剩餘項目 $1,051 $255 $893 $21,282 $15 $7,980 $22,868 $30,863

Q3.What is the company’s weighted average cost of capital (WACC)? 甲、 Asset beta 乙、 Target capital structure 丙、 Cost of debt capital 丁、 Cost of equity capital

Value of debt = Book value of equity / Equity * Debt Book value of equity = Book Value per share * Shares outstanding Market value of equity = Closing stock price * Shares outstanding

Micron Technology D = book value of debt (4-30-2010) BVE = book value of equity (4-30-2010) MVE = market value of equity (4-30-2010) βD = debt beta βE = equity or levered beta βA = asset or unlevered beta

$2,719 $5,602 $7,925 0.20 1.25 1.036

STEC, Inc. D = book value of debt (4-30-2010) BVE = book value of equity (4-30-2010) MVE = market value of equity (4-30-2010) βD = debt beta βE = equity or levered beta βA = asset or unlevered beta

$0 $276 $699 0.2 1 1

SanDisk Corporation D = book value of debt (4-30-2010) BVE = book value of equity (4-30-2010) MVE = market value of equity (4-30-2010) βD = debt beta βE = equity or levered beta βA = asset or unlevered beta

$949 $4,157 $9,135 0.2 1.36 1.28

Q3.What is the company’s weighted average cost of capital (WACC)?

Q4. What course of action do you recommend regarding the proposed investment in the new product line? Should the company accept or reject this investment opportunity? Why?

Q4. What course of action do you recommend regarding the proposed investment in the new product line? Should the company accept or reject this investment opportunity? Why?

Q4. What course of action do you recommend regarding the proposed investment in the new product line? Should the company accept or reject this investment opportunity? Why?

任何投資新產品線的決定都需要估算貼現率（即 WACC ）。在估算 WACC 時，計算權益成本，債務成本以及權益和 債務相對權重的投入，依據各種替代融資方法進行評估，以獲得為其現有和新產品線的預測銷售提供資金所需的額 外資金。這些方法是：（ 1 ）內部融資融資，（ 2 ）短期債務，（ 3 ）長期債務（ 4 ）股權發行。 按投資主體分 權益資本

組成要素

按取得方向分

留存收益 ( 未分配利潤 )

內源資金

普通股股本 優先股股本

債務資本

長期負債

外源資金

Q5. How does your recommendation from question 3 above impact your estimate of the company’s forecasted income statements and balance sheets, and required external financing in 2010, 2011, and 2012? Flash Memory, Inc. Historical / Forecast Income Statements (000s) no project

New project line

Forecast

Forecast

2010

2011

2012

2010

2011

2012

$120,000

$144,000

$144,000

$120,000

$165,600

$172,000

$97,320

$116,784

$116,784

$97,320

$134,302

$139,492

$22,680

$27,216

$27,216

$22,680

$31,298

$32,508

$6,000

$7,200

$7,200

$6,000

$8,280

$8,600

$10,032

$12,038

$12,038

$10,028

$13,844

$14,379

$6,648

$7,978

$7,978

$6,648

$9,174

$9,529

Interest expense

$937

$1,323

$1,565

$937

$1,642

$2,262

Other income (expenses)

-$50

-$50

-$50

-$50

-$50

-$50

Income before income taxes

$5,661

$6,605

$6,363

$5,661

$7,482

$7,213

Income taxes

$2,264

$2,642

$2,545

$2,264

$2,993

$2,885

Net income

$3,397

$3,963

$3,818

$3,396

$4,489

$4,328

$2.28

$2.66

$2.56

$2.28

$3.01

$2.90

Sales Cost of goods sold Gross margin Research and development Selling, general and administrative Operating income

Earnings per share

Q5. How does your recommendation from question 3 above impact your estimate of the company’s forecasted income statements and balance sheets, and required external financing in 2010, 2011, and 2012?

Flash Memory, Inc. Historical / Forecast Balance Sheets (000s)

no project

New project line

Forecast

Forecast

2010

2011

2012

2010

2011

2012

$3,960

$4,752

$4,752

$3,960

$5,465

$5,676

Accounts receivable

$19,726

$23,671

$23,671

$19,726

$27,222

$28,274

Inventories Prepaid expenses

$13,865 $480

$16,638 $576

$16,638 $576

$13,865 $480

$19,133 $662

$19,873 $688

$38,031

$45,637

$45,637

$38,031

$52,482

$54,511

$8,182 $2,179 $6,003

$9,082 $2,793 $6,289

$9,982 $3,474 $6,508

$8,182 $2,179 $6,003

$9,082 $2,793 $6,290

$9,982 $3,474 $6,508

$44,034

$51,926

$52,145

$44,034

$58,772

$61,019

Cash

Total current assets Property, plant & equipment at cost Less: Accumulated depreciation Net property, plant & equipment Total assets

Q6

 How do these forecasted income statements and balance sheets differ if the company relies solely on additional notes payable from its commercial bank, compared to a sale of new equity? 假設仍進行新產品線投資：  A 方案：採用借貸的利率 9.25% ，不出售新普通股  B 方案：採用借貸的利率 7.25% ，出售 300,000 股普通股，每股收益為 23 美元

Q6 新產品線投資 新普通股出售 所有借貸的利率 　 營業額 銷貨成本    毛利率 研究與開發 銷售，一般和行政    營業收入 利息花費 其他收入（支出） 所得稅前收入 所得稅 淨收入 每股收益 EPS

YES NO 9.25% 　

A 方案

Forecast 　 2010 2011

YES YES 7.25% 2012

　

　

B 方案

出售 300,000 股普通股 每股收益為 23 美元 Forecast 　 2010 2011 2012

Remark

$120,000 $165,600 $172,000 $97,320 $133,848 $138,904 $22,680 $31,752 $33,096 　 $6,000 $7,200 $7,200 $10,032 $14,144 $14,379 $6,648 $10,408 $11,517 　 $937 $1,527 $2,118 應付票據 *9.25% 　 　 -$50 -$50 -$50 $5,661 $8,831 $9,349 $2,264 $3,532 $3,740 $3,396 $5,299 $5,609 　

$120,000 $165,600 $172,000 $97,320 $133,848 $138,904 $22,680 $31,752 $33,096 $6,000 $7,200 $7,200 $10,032 $14,144 $14,379 $6,648 $10,408 $11,517 $735 $687 $1,112 借貸金額及利率不 應付票據 *7.25% 　 同，故利息也不同 -$50 -$50 -$50 $5,863 $9,671 $10,355 $2,345 $3,868 $4,142 $3,518 $5,802 $6,213

$2.28 $3.55 = 淨收入 Net income/ 已發行股數 1491662

$1.96 $3.24 $3.47 故相利獲利 = 淨收入 Net income/( 已發行股數 下， EPS 也不同 1,491,662+ 新發行股數 30,0000)

$3.76

流通股數不同

Q6 新產品線投資 新普通股出售 所有借貸的利率 　 現金 應收賬款 存貨 預付的費用    流動資產總額 物業，廠房及設備 減：累計折舊 淨資產，廠房及設備    總資產 (X) 應付賬款 (A) 應付票據 預提費用 (B) 應付所得稅 (C) 其他流動負債 (D)

YES NO 9.25% 　

2010 $3,960 $19,726 $13,865 $480 $38,031

A 方案

YES YES 7.25%

B 方案

出售 300,000 股普通股 每股收益為 23 美元 Forecast 　 Forecast 　 　 2011 2012 　 2010 2011 2012 $5,465 $5,676 $3,960 $5,465 $5,676 $27,222 $28,274 $19,726 $27,222 $28,274 $19,069 $19,789 $13,865 $19,069 $19,789 $662 $688 $480 $662 $688 $52,418 $54,427 　 $38,031 $52,418 $54,427

$10,382 $2,179 $8,203 $46,234

$11,282 $3,233 $8,050 $60,467

$12,182 $4,354 $7,828 $62,255 　

$10,382 $2,179 $8,203 $46,234

$11,282 $3,233 $8,050 $60,467

$12,182 $4,354 $7,828 $62,255

$4,799

$6,601

$6,850

$4,799

$6,601

$6,850

$16,506 $876 $226 $744

$22,897 $1,209 $353 $1,027

$18,719 　 $1,256 $374 $1,066

$9,476 $876 $235 $744

$15,338 $1,209 $387 $1,027

Remark

= 總資產 -(A+B+C+D+ 股東權 $10,550 益 ) $1,256 $414 $1,066

Q6 新產品線投資 新普通股出售 所有借貸的利率 　 每股面值 0.01 美元的 普通股 實收資本超過面值

YES NO 9.25% 　

A 方案

Forecast 　 2010 2011

YES YES 7.25% 　

2012 　

B 方案

出售 300,000 股普通股 每股收益為 23 美元 Forecast 　 2010 2011 2012

Remark

$15 $7,980

$15 $7,980

$15 $7,980

$18 $14,877

$18 $14,877

留存收益    股東權益合計

$15,087 $23,082

$20,386 $28,381

$25,995 $33,990

$15,209 $30,104

$21,012 $35,907

$18=15+(300000*0.01/1000) $14,877 =7980+(300000* 每股收益 22.99/1000) $27,224 2009 留存收益 +2010 淨收入 $42,119

負債總額與股東權益

$46,234

$60,467

$62,255

$46,234

$60,467

$62,255

已發行股數

1,491,662 1,491,662 1,491,662

1,791,662 1,791,662 1,791,662 +300,000 股

每股賬面價值

$15.47

$19.03

$22.79

$16.80

$20.04

= 股東權益 /( 已發行股 $23.51 數 /1000)

股本回報率 ROE 利息覆蓋率（次） 應付票據 / 應收賬款

14.7% 7.1 83.7%

18.7% 6.8 84.1%

16.5% 5.4 66.2%

11.7% 9.1 48.0%

16.2% 15.1 56.3%

14.8% = 淨收入 / 股東權益 *100% 10.4 = 營業收入 / 利息花費 37.3%

Q7

 If you were Hathaway Browne, what financing alternative would you recommend to the board of directors to meet the financing needs you estimated in question 2 through 5 above? Explain the cost and benefit of the alternative you recommended. 身為 Flash Memory 的 CFO ，在思考後，將於三個方案中進行選擇 ! A 方案 B 方案

新產品線 不投資 投資

C 方案

投資

借貸方案 9.25% 9.25% 7.25%

股權策略 不發售新股 不發售新股 發售新股

Q7 發展策略以增加股東價值

外部力量

策略

管理能力

公司治理

股東價值

市場對公司 的觀點

價值驅動 現金流 依時變化

資源 關鍵績效指標 (KPI) 和目標

財務策略

平衡經營與財務風險

• 財務風險應與經營風險狀況相互搭配 • 不同類型的經營模式也應該佐以相應的財務策略

跟銀行貸款 Flash memory 發行新股

高

(1)

經 營 風 險

(3)

低 低

經營與財務風險矩陣

？ X X ？ (2)

(4)

財務風險

高

平衡經營與財務風險

• 財務風險應與經營風險狀況相互搭配 • 不同類型的經營模式也應該佐以相應的財務策略

跟銀行貸款 Flash memory 發行新股

高

(1)

經 營 風 險

(3)

低 低

經營與財務風險矩陣

X X X V (2)

(4)

財務風險

高

Q7

　

　

　

A 方案 　

每股收益 EPS 股本回報率 ROE 投入資本報酬率 ROIC 　

　 　 　

　 　

　

　

2010 $2.28 14.7% 10.8%

B 方案

每股收益 EPS 股本回報率 ROE 投入資本報酬率 ROIC 　

　 　 　

　

C 方案 　

　 每股收益 EPS 股本回報率 ROE

不投資新產品線 不賣新股票 借入 9.25 ％ 　

　

2011 $2.66 14.7% 10.7%

　 　 投資新產品線 不賣新股票 借入 9.25 ％ 　 2010 2011 $2.28 $3.55 14.7% 18.7% 10.3% 12.3% 　 　 投資新產品線 出售 300,000 股普通股 借入 7.25 ％ 　 2010 2011 $1.96 $3.24 11.7% 16.2%

ROE

ROIC

2012 排名 $2.56 12.4% 3 10.3% 　

排名

2012 $3.76 16.5% 12.6%

1 　

2012 $3.47 14.8%

2

3

2

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