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
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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
2013 2 31 16,000 568,700 5
2014 2 33 16,000 600,700 0
2015 2 35 15,000 630,700 2003 2005 2007 2009

Number of Showrooms
 700,000

600,000

500,000

400,000

300,000

200,000

100,000

0
005 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
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%
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
CGS 1,463 2,309 3,018 2,394 2,753 2,311 2,194 2,150 2,416
SGA 410 640 857 856 815 765 767 687 791
Advertising 203 334 399 434 422 423 391 401 457
Depreciation 72 72 72 72 72 0 0 0 65
Lease 250 250 250 250 250 250 302 302 302
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
CGS 4,748 7,428 7,894 7,216 6,031 6,675 6,691 7,176
SGA 1,171 2,148 2,631 2,323 2,239 2,224 2,395 2,319
Advertising 685 971 1,266 1,213 1,235 1,241 1,245 1,287
Depreciation 235 235 235 235 235 0 0 0
Lease 830 830 830 830 830 830 1,003 1,003
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
CGS 6,978 10,917 11,430 8,499 9,387 9,857 9,042
SGA 1,953 2,977 3,371 3,039 3,021 3,228 3,693
Advertising 1,041 1,488 1,587 1,598 1,605 1,645 1,793
Depreciation 363 363 363 363 363 0 0
Lease 1,250 1,250 1,250 1,250 1,250 1,250 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
CGS 9,526 11,229 13,594 9,902 13,259 13,932
SGA 2,767 4,016 4,237 3,780 4,895 4,946
Advertising 1,400 1,784 1,964 2,014 2,327 2,287
Depreciation 594 594 594 594 594 0
Lease 1,910 1,910 1,910 1,910 1,910 1,910
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
CGS 11,205 14,801 16,422 15,232 17,856
SGA 3,050 3,878 5,471 5,166 5,917
Advertising 1,578 1,986 2,458 2,748 3,109
Depreciation 812 812 812 812 812
Lease 2,530 2,530 2,530 2,530 2,530
2008 2 15,500 1 2 3 4 5 6 7 8 9 10 11
Sales 3,187 5,176 7,244 9,257
CGS 2,053 3,467 4,421 3,764
SGA 522 951 1,225 1,243
Advertising 326 499 598 675
Depreciation 185 185 185 185
Lease 610 610 610 610
2009 1 14,500 1 2 3 4 5 6 7 8 9 10
Sales 1,437 2,507 3,540
CGS 1,021 1,652 1,887
SGA 257 480 615
Advertising 158 227 303
Depreciation 79 79 79
Lease 280 280 280
2010 2 14,700 1 2 3 4 5 6 7 8 9
Sales 3,008 5,300
CGS 2,226 3,526
SGA 623 1,028
Advertising 353 473
Depreciation 150 150
Lease 565 565
2011 2 15,400 1 2 3 4 5 6 7 8
Sales 3,354
CGS 2,357
SGA 701
Advertising 358
Depreciation 160
Lease 610
2012 3 16,300 1 2 3 4 5 6 7
Sales 5,379
CGS
SGA
Advertising
Depreciation
Lease 1,000
2013 2 16,000 1 2 3 4 5 6
Sales 3,622
CGS
SGA
Advertising
Depreciation
Lease 668
2014 2 16,000 1 2 3 4 5
Sales 3,731
CGS
SGA
Advertising
Depreciation
Lease 682
2015 2 15,000 1 2 3 4
Sales 3,597
CGS
SGA
Advertising
Depreciation
Lease 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
Inventory 671 1,090 1,330 1,206 1,167 980 972 1,082 1,027 1,090
Accts payable 236 396 448 405 403 350 345 370 369 390
Accr expenses 29 49 62 61 61 53 54 57 58 58

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
Inventory 2,061 3,590 4,304 3,352 2,851 3,042 3,248 3,397 3,619
Accts payable 762 1,255 1,421 1,124 1,025 1,090 1,124 1,139 1,153
Accr expenses 95 158 193 173 162 162 175 177 179

2005 4 18,500 0 1 2 3 4 5 6 7 8 9 10 11 12 13
Cap expenditure 1,814
Accts receivable 3,140 5,508 6,296 6,231 7,149 7,751 7,950
Inventory 3,296 5,271 4,640 3,975 4,075 4,427 4,354 5,114
Accts payable 1,078 1,760 1,742 1,381 1,523 1,572 1,565 1,631
Accr expenses 138 212 240 203 240 244 251 259

2006 5 21,100 0 1 2 3 4 5 6 7 8 9 10 11 12
Cap expenditure 2,971
Accts receivable 4,433 6,593 7,974 10,040 10,908 11,761
Inventory 4,344 6,518 6,635 5,870 6,689 6,854 6,348
Accts payable 1,533 2,227 2,181 1,889 2,165 2,325 2,377
Accr expenses 193 272 300 291 337 343 362

2007 6 22,100 0 1 2 3 4 5 6 7 8 9 10 11
Cap expenditure 4,058
Accts receivable 4,817 6,829 9,849 12,400 13,920
Inventory 5,232 6,246 8,710 7,320 8,121 9,022
Accts payable 1,732 2,480 2,712 2,631 2,712 2,919
Accr expenses 213 293 362 381 436 435
2008 2 15,500 0 1 2 3 4 5 6 7 8 9 10
Cap expenditure 924
Accts receivable 1,048 1,758 2,212 2,905
Inventory 1,028 1,711 2,147 1,727 1,911
Accts payable 349 547 662 586 690
Accr expenses 43 72 88 94 101

2009 1 14,500 0 1 2 3 4 5 6 7 8 9
Cap expenditure 394
Accts receivable 484 840 1,191
Inventory 488 882 881 823
Accts payable 171 261 327 281
Accr expenses 21 34 43 44

2010 2 14,700 0 1 2 3 4 5 6 7 8
Cap expenditure 752
Accts receivable 956 1,787
Inventory 1,013 1,787 1,913
Accts payable 348 577 683
Accr expenses 44 71 91

2011 2 15,400 0 1 2 3 4 5 6 7
Cap expenditure 798
Accts receivable 1,093
Inventory 1,067 1,795
Accts payable 387 623
Accr expenses 47 76

2012 3 16,300 0 1 2 3 4 5 6
Cap expenditure 1,293
Accts receivable
Inventory 1,708
Accts payable 617
Accr expenses 79
2013 2 16,000 0 1 2 3 4 5
Cap expenditure 860
Accts receivable
Inventory
Accts payable
Accr expenses

2014 2 16,000 0 1 2 3 4
Cap expenditure 876
Accts receivable
Inventory
Accts payable
Accr expenses

2015 2 15,000 0 1 2 3
Cap expenditure 837
Accts receivable
Inventory
Accts payable
Accr expenses
Exhibit 7: Teuer Furniture Cash Flow Assets
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
- Costs -2,582 -12,003 -29,394 -53,144 -77,591 -84,510 -89,222 -100,704 -112,132
- Taxes 0 0 0 0 0 -543 -8,892 -13,356 -14,434
Net income 0 -526 -1,588 -2,693 -1,604 1,600 5,626 13,337 20,033 21,651
- Capital expenditure -358 -1,175 -1,814 -2,971 -4,058 -924 -394 -752 -1,122 -2,229
+ Depreciation 0 72 307 669 1,264 2,075 2,188 2,032 1,820 1,450
- Increase in NWC -406 -2,193 -5,957 -9,467 -11,645 -8,498 -6,281 -8,494 -7,192 -8,365
Cash flow to assets -764 -3,823 -9,052 -14,461 -16,043 -5,747 1,139 6,123 13,539 12,508
Exhibit 8: Forecasting Sales Revenue and Costs
Year 1 2 3 4 5 6 7 8 9
Sales growth 2003 73.6% 34.6% 19.5% 15.1% 0.2% 1.2% 1.0% -0.6%
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 9
CGS 2003 71.1% 61.5% 57.8% 38.9% 43.4% 42.0% 38.9% 36.6% 40.0%
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%

Year 1 2 3 4 5 6 7 8 9
SGA 2003 19.9% 17.1% 16.4% 13.9% 12.9% 13.9% 13.6% 11.7% 13.1%
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%

Year 1 2 3 4 5 6 7 8 9
Advertising 2003 9.9% 8.9% 7.6% 7.1% 6.7% 7.7% 6.9% 6.8% 7.6%
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%
Exhibit 9: Forecasting Investment
Year 1 2 3 4 5 6 7 8 9
Accounts Receivable 2003 36.5% 31.6% 31.9% 32.1% 32.2% 30.9% 31.0% 29.7% 31.5%
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 9
Inventory 2003 45.9% 47.2% 44.0% 50.4% 42.4% 42.4% 44.3% 50.3% 42.5%
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 9
Accounts Payable 2003 16.1% 17.2% 14.8% 16.9% 14.6% 15.2% 15.7% 17.2% 15.3%
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 9
Accrued Expenses 2003 4.7% 5.1% 4.9% 4.7% 4.9% 4.5% 4.6% 5.2% 4.7%
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%
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
CGS -61,955
SGA (exc adv & dep) -21,253
Advertising -10,744
Depreciation -1,450
Lease (stores) -9,320
Corp Expense (inc lease/adv) -7,411
Taxes -14,434
Net income 21,651

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
Inventory 33,343
Total Current Assets 81,543
PPE 3,920
Total Assets 85,463

Liabilities and Equity

Accounts Payable 11,364
Accrued Expenses 1,682
Total Current Liabilities 13,046
Debt 0
Equity 72,417
Total Liabilities and Equity 85,463

Balance sheet check (A=L+E)

Teuer Furniture Pro Forma Cash Flow Assets
2012 2013 2014 2015 2016 2017 2018
Sales 148,218
- Costs -112,132
- Taxes -14,434
Net income 21,651
- Capital expenditure -2,229
+ Depreciation 1,450
- Increase in NWC -8,365
Cash flow assets 12,508
Terminal value

Asset value
Share value

Parameters:
Asset discount rate 12.1%
Long-term growth rate 3.5%
Shareholders (#) 187
Shares outstanding (K) 9,945