Enphase Energy Inc. Valuation Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Enphase Energy Inc. Valuation Case Solution

Existing Leases
	2013	2014	2015	2016	2017
Rental Revenue	1,160,719	1,359,895	1,593,250	1,866,647	2,186,958
Plus: Tenant Reimbursements	332,807	406,746	497,111	607,553	742,530
Plus: Construction Management Fees	8,484	8,539	8,596	8,652	8,709
Plus: Other Revenue	7,660	7,706	7,752	7,798	7,844
Total Revenue	1,509,670	1,782,886	2,106,708	2,490,650	2,946,043
Less: Rental Property Operating & Maintenance	448,718	529,926	626,175	740,294	875,650
Less: Property Taxes	82,001	96,841	114,430	135,284	160,020
Less: Insurance	11,331	13,381	15,812	18,693	22,111
Less: Construction Management Expenses	1,884	2,225	2,629	3,108	3,676
Less: General & Administrative	67,523	79,743	94,227	111,400	131,768
Less: Transaction Expenses	13,125	15,500	18,315	21,653	25,612
Less: Other	1,487	1,756	2,075	2,454	2,902
EBITDA	883,602	1,043,514	1,233,045	1,457,764	1,724,303
Less: Depreciation & Amortization	451,523	533,239	630,090	744,922	881,125
EBIT	432,078	510,275	602,955	712,842	843,178

Incorporating Future Leases
	2013	2014	2015	2016	2017
Total Revenue	2,472,217	2,709,960	2,964,066	3,268,811	3,668,768
Less: Rental Property Operating & Maintenance	734,815	805,479	881,007	971,586	1,090,465
Less: Property Taxes	134,283	147,197	160,999	177,552	199,276
Less: Insurance	18,555	20,340	22,247	24,534	27,536
Less: Construction Management Expenses	3,085	3,381	3,699	4,079	4,578
Less: General & Administrative	110,575	121,209	132,574	146,205	164,093
Less: Transaction Expenses	21,493	23,560	25,769	28,419	31,896
Less: Other	2,435	2,670	2,920	3,220	3,614
EBITDA	1,446,975	1,586,125	1,734,852	1,913,217	2,147,310
Less: Depreciation & Amortization	739,409	810,515	886,515	977,661	1,097,283
EBIT	707,566	775,610	848,337	935,557	1,050,027

Question 3

To calculate the enterprise value or the worth of DLR; different adjustments need to be made in the balance sheet as the new leases are incorporated. The market adjustments include the working capital requirement in each case based on the relevant sales, different levels of depreciation and most importantly the changes in the company’s indebtness. All the cash flows are discounted with the relevant discount rates, which resulted Enterprise values of 101692137 and 43967823 in case of existing and new future leases. The overall analysis concludes that segregation is important, as the new lease is providing the company with additional benefits, as the enterprise value in case of new leases is higher.

Existing Leases
	2,013	2,014	2,015	2,016	2,017
EBIT	432,078	510,275	602,955	712,842	843,178
EBIT*(1-T) @ 30%	302,455	357,192	422,068	498,989	590,225
Add: Depreciation	451,523	533,239	630,090	744,922	881,125
Less: Change in NWC	-451498	-137922	-163468	-193817	-229887
Less: CAPEX (Table 9)	585827	749731	770349	887894	74965
FCFF	619650	278622	445278	549835	1626271
Terminal Value					134017613
Total FCFF	619650	278622	445278	549835	135643884
Discounted Cash Flows	583067	246695	370978	431044	100060353
Enterprise Value					101692137

Incorporating New Leases
	2,013	2,014	2,015	2,016	2,017
EBIT	707,566	775,610	848,337	935,557	1,050,027
EBIT*(1-T) @ 30%	495,296	542,927	593,836	654,890	735,019
Add: Depreciation	739,409	810,515	886,515	977,661	1,097,283
Less: Change in NWC	-937401	-120015	-128275	-153838	-201902
Less: CAPEX (Table 9)	585827	749731	770349	887894	74965
FCFF	1586280	723726	838277	898494	1959239
Terminal Value					59025856
Total FCFF	1586280	723726	838277	898494	60985095
Discounted Cash Flows	1462208	614940	656561	648683	40585431
Enterprise Value					43967823