I created a spreadsheet where I forecasted income statement,

| June 11, 2016

Question
CHARTER COMMUNICATIONS INC INCOME STATEMENT
2014 ($ million)
Revenue
9,108
Cost of revenue
4,562
Gross profit
4,546
Operating expenses
Sales, General and administrative
529
Other operating expenses
3,046
Total operating expenses
3,575
Operating income
971
Other income (expense)
918
Income before taxes
53
Provision for income taxes
236
Net income from continuing operations
183
Net income
183

CHARTER COMMUNICATIONS INC BALANCE SHEET
2014 ($million)
Assets
Current Assets
Cash and cash equivalents
3
Total cash
3
Receivables
285
Prepaid expenses
83
Total current assets
371
Non­current assets
Property, plant and equipment
Gross property, plant and equipment
13857
Accumulated Depreciation
5484
Net property, plant and equipment
8373
Goodwill
1168
Intangible assets
7325
Other long­term assets
7313
Total non­current assets
24179
Total assets
24550
Liabilities and stockholders’ equity
Current liabilities
Accounts payable
140
Accrued liabilities
1410
Deferred revenues
85
Total current liabilities
1635
Non­current liabilities
Long­term debt
21023
Deferred taxes liabilities
1674
Other long­term liabilities
72
Total non­current liabilities
22769
Total liabilities
24404
Stockholders’ equity
Additional paid­in capital
1930
Retained earnings
1762
Treasury stock
Accumulated other comprehensive income
22
Total stockholders’ equity
146
Total liabilities and stockholders’ equity
24550

TIME WARNER CABLE INC (TWC) INCOME STATEMENT
2014 ($ million)
Revenue
22,812
Cost of revenue
5,294
Gross profit
17,518
Operating expenses
Sales, General and administrative
4,561
Restructuring, merger and acquisition
225
Other operating expenses
8,100
Total operating expenses
12,886
Operating income
4,632
Interest Expense
1,419
Other income (expense)
35
Income before taxes
3,248
Provision for income taxes
1,217
Net income from continuing operations
2,031
Net income
2,031

TIME WARNER CABLE INC (TWC) BALANCE SHEET
2014 ($million)
Assets
Current assets
Cash and cash equivalents
707
Receivables
949
Deferred income taxes
269
Prepaid expenses
365
Other current assets
26
Total current assets
2316
Non­current assets
Gross property, plant and equipment
38552
Accumulated Depreciation
22562
Net property, plant and equipment
15990
Equity and other investments
64
Goodwill
3137
Intangible assets
26535
Other long­term assets
459
Total non­current assets
46185
Total assets
48501
Liabilities and stockholders’ equity
Current liabilities
Short­term debt
1017
Accounts payable
567
Accrued liabilities
2715
Deferred revenues
198
Total current liabilities
4497
Non­current liabilities
Long­term debt
22701
Deferred taxes liabilities
12560
Minority interest
4
Other long­term liabilities
726
Total non­current liabilities
35991
Total liabilities
40488
Stockholders’ equity
Common stock
3
Additional paid­in capital
7172
Retained earnings
1162
Accumulated other comprehensive income
324
Total stockholders’ equity
8013
Total liabilities and stockholders’ equity
48501

CHARTER COMMUNICATIONS INC Statement of CASH FLOW
(Source: www.morningstar.com)
Cash Flows From Operating Activities
Net income
Depreciation & amortization
Amortization of debt discount/premium and issuance costs
Deferred income taxes
Accounts receivable
Prepaid expenses
Other working capital
Other non­cash items
Net cash provided by operating activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment
Other investing activities
Net cash used for investing activities
Cash Flows From Financing Activities
Debt issued
Debt repayment
Preferred stock repaid
Common stock repurchased
Other financing activities
Net cash provided by (used for) financing activities
Net change in cash
Cash at beginning of period
Cash at end of period
Free Cash Flow
Operating cash flow
Capital expenditure
Free cash flow
ANALYSIS

2014

$million

183
2102
233
51
9
158
109
2359
2221
7083
9304
8806
1980
19
120
6927
18
21
3
2359
2188
171

($ million)

2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
171
188.1
206.91 227.601 250.3611 275.39721 302.93693 333.23062 366.55369 403.20906 443.5299607
1 0.8695652 0.7561437 0.6575162 0.5717532 0.4971767 0.4323276 0.375937 0.3269018 0.2842624 0.247184706
171 163.56522 156.45369 149.65135 143.14477 136.92109 130.968 125.27373 119.82705 114.61718 109.633823
1,521.06
2,699.75
$4,220.80 Million

Free cash flow
Discounting factor @15%
PV @ 15%
Total present Value
Residual value
Net Present Value (Value of the firm)
Assumption:

* The free cash flow increases with the constant rate of 10% each year for the next 10 years.
* Thegrowth rate in cash flows becomes 5% per year thereafter.
* The WACC or discounted rate is 15% for each year

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TIME WARNER CABLE INC (TWC) Statement of CASH FLOW
(Source: www.morningstar.com)
Cash Flows From Operating Activities
Net income
Depreciation & amortization
Investment/asset impairment charges
Deferred income taxes
Stock based compensation
Accounts payable
Other working capital
Other non­cash items
Net cash provided by operating activities
Cash Flows From Investing Activities
Investments in property, plant, and equipment
Acquisitions, net
Purchases of investments
Sales/Maturities of investments
Purchases of intangibles
Sales of intangibles
Other investing activities
Net cash used for investing activities
Cash Flows From Financing Activities
Debt issued
Debt repayment
Preferred stock repaid
Common stock repurchased
Excess tax benefit from stock based compensation
Dividend paid
Other financing activities
Net cash provided by (used for) financing activities
Net change in cash
Cash at beginning of period
Cash at end of period
Free Cash Flow
Operating cash flow
Capital expenditure
Free cash flow
ANALYSIS

2014

$million

2031
3371
756
182
82
82
154
6350
4136
2
19
39
66
4092
507
1750
259
141
857
142
2076
182
525
707
6350
4136
2214

($ million)

2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2214
2435.4 2678.94 2946.834 3241.5174 3565.6691 3922.2361 4314.4597 4745.9056 5220.49619 5742.545807
1 0.8695652 0.7561437 0.6575162 0.5717532 0.4971767 0.4323276 0.375937 0.3269018 0.28426241 0.247184706
2214 2117.7391 2025.6635 1937.5912 1853.3481 1772.7677 1695.6909 1621.9652 1551.445 1483.99084 1419.469498
19,693.67
34,954.63
$54,648.30 Million
(That is the amount, the Charter Comm will have to pay to acquire the Time Warner Inc.)

Free cash flow
Discounting factor @15%
PV @ 15%
Total present Value
Residual value
Net Present Value (Value of the firm)
Assumption:

* The free cash flow increases with the constant rate of 10% each year for the next 10 years.
* Thegrowth rate in cash flows becomes 5% per year thereafter.
* The WACC or discounted rate is 15% for each year

8

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