Pick your name. The page opens your slides in My part and keeps your ticks separate from everyone else's on this device.
Joan, Andrea and Matthew want to open a Taktika Barra, the franchise of a famous Basque chef, on Sant Miquel beach next to the W Hotel. It opens on 1 July 2027. At 9pm, in the W Hotel lobby, they pitch it to the esade eBan business angels. Your group plays the three students, and your answer is invest: at the 10% the investors ask for, the bar creates €872,210 of value.
The professor's feedback to the groups so far: talk in depth about the business and make the perfect pitch to convince the investors to invest. Our slides are light, so every presenter has to know the content and the data behind them, in the Excel and in the case.
Turning the pitch into a lecture on formulas. The investors take DCF for granted ("the method", says the case). What they want to hear is why this bar, in this spot, makes this much cash, and what could go wrong.
Course concept cards use five labels, each with its own colour. Click More detail & examples on any concept to open the course's own examples. Yellow tags like Slides 2.4 or FAQ 9 say where a point comes from; green ones like Excel: Valuation row 24 point to the cell in our model.
What the course slides teach, in plain English.
How the concept shows up in our case and our numbers.
The worked example from the slides, inside the dropdowns.
A ready line you can say to the investors.
A common mistake, or a point the professor is likely to push on.
Start with the story, then the ten data points the chef gave them and the professor's eleven clarifications.
Joan L. will finish his degree at a well known business school at the end of June 2028. He loves Barcelona and wants to start a business there before he graduates. After Christmas 2026 his friends Andrea M. and Matthew C. propose opening a Taktika Barra, the franchise of a very famous Basque chef.
The bar would sit just by the sea, near Sant Miquel beach and Hotel Vela, the W Hotel, which the case describes as one of the most fashionable places in the city. The case also mentions an idea of personal chill outs, "perfectly safe", for bar lovers. The bar would open on 1 July 2027, and the chef supplied the key data.
They want the investors from esade eBan, the school's business angels network, to finance part of the project. The meeting is at 9pm in the W Hotel lobby, where the investors will decide whether to invest. They know discounted cash flow is "the method". "Anything else?" Joan wonders. The assignment: prepare that presentation as if you were these students.
We're asking you to back a famous chef's tapas brand, on one of Barcelona's most fashionable beaches, next to the W Hotel.
| # | What the case says | How we used it | In the Excel |
|---|---|---|---|
| 1 | Premises €480,000: one third paid on 30 June 2027, the rest on 30 June 2028. Depreciable over 8 years. | The whole €480,000 is booked on day 0 and depreciated at €60,000 a year. €160,000 is paid then; the €320,000 is a seller credit paid a year later. | Inputs B10 to B12; Balance rows 6, 9, 30 |
| 2 | The bar's year runs from 1 July to 30 June. | Year 1 is July 2027 to June 2028. Every cash flow is dated 30 June. | All sheets |
| 3 | €8,000 a year of noncurrent assets on 30 June 2028, 2029, 2030 and 2031, straight line over 8 years, no residual value. | €1,000 of depreciation for each, starting the year after it is bought: total depreciation €60,000 rising to €64,000. | Inputs B13 to B16; Balance rows 10 to 14 |
| 4 | Sales €600,000 in year 1, growing 3% a year for the next 4 years. | €600,000; €618,000; €636,540; €655,636; €675,305. | Inputs B19, B20; Income Statement row 6 |
| 5 | Raw materials 34% of sales in year 1, improved by 2% in year 2, then 30%. | Read as 2 points: 34%, 32%, then 30% from year 3. | Inputs B21 to B23; Income Statement rows 7, 8 |
| 6 | Personnel 25% of sales. | €150,000 in year 1, rising with sales. | Inputs B24; Income Statement row 10 |
| 7 | Franchise royalty 8% of total sales. | €48,000 in year 1, rising with sales. | Inputs B25; Income Statement row 11 |
| 8 | Other costs €10,000 in year 1, growing 5% a year for 4 years. | €10,000 to €12,155. | Inputs B26, B27; Income Statement row 12 |
| 9 | Clients pay cash, stock lasts 30 days, suppliers are paid in 15 days. | No receivables. Stock is 30/360 of COGS, suppliers 15/360 of COGS: €8,500 tied up in year 1. | Inputs B30 to B32; Balance rows 22 to 25 |
| 10 | Cost of capital 10%, tax rate 30%. | Every cash flow discounted at 10%; tax at 30% of EBIT. | Inputs B4, B5 |
| # | What the professor clarified | What it means for us |
|---|---|---|
| 1 | The first perpetuity cash flow comes at the end of the period starting July 2032. To promise a perpetuity, Total Net Investment must stay the same. | TNI stays at €274,441 for ever. The FAQ's dates are garbled, so we follow the case text: first perpetuity cash flow on 30 June 2033, valued on 30 June 2032. |
| 2 | A project that ends and gets back its working capital is not worth the same as a company that continues and whose perpetuity has a value. | Two valuations: going concern €872,210 and five year project €161,701. |
| 3 | For perpetuities, see slide 11 of Slides 2.2. | Terminal value = cash flow ÷ (10% minus growth), then discounted five years. |
| 4 | Investments happen on the exact dates in the case. | The €8,000 investments sit on 30 June 2028 to 2031. |
| 5 | Excel's IRR and MIRR use all future cash flows. MIRR by hand: final value of the positive flows at the discount rate, present value of the negative flows, then the rate linking them. | MIRR 42.5% (17.6% for the five year project), checked by hand on the Numbers tab. |
| 6 | Whether to build balance sheets is up to you. | We did: Total Net Investment and capital employed, so ROCE is available. |
| 7 | It's a tapas bar: customers pay cash, not in 90 days. | Receivables are zero. |
| 8 | Build the first perpetuity year's P&L, and keep NNCA and ONWC the same as the year before. Invest in the year before the perpetuity as much as you depreciate. | Year 5 capex is €64,000, equal to depreciation. |
| 9 | The €480,000 is one investment. You can split how you pay or depreciate it, not the investment itself. | €480,000 on day 0; one third paid, two thirds financed by the seller. |
| 10 | It's a Block 2 case: they want to know whether the business is good. Nobody asked how to finance it. You decide what an investor needs to see. Maximum 15 minutes. | We value the business before financing and show the funding need, not a financing plan. |
| 11 | Financing from equipment suppliers has no financial cost and is not tax deductible, so it isn't financial debt. | The seller credit is a later payment, not debt. |
This is what the professor asked for: the business reasons behind the numbers, so you can talk about the bar, not just the spreadsheet.
The bar sits next to the W Hotel on Sant Miquel beach, one of the city's most fashionable spots, and carries a famous chef's name, recipes and system. That is why year 1 can start at €600,000 instead of building up from zero.
Year 1 sales €600,000, about €1,670 a day, with the brand paid for through an 8% royalty
Raw materials 30%, staff 25% and the royalty 8% are all shares of sales: 63% from year 3. Only other costs (about €10,000) and depreciation (about €60,000) are fixed. Each extra euro of sales leaves 37 cents before fixed costs and tax, and a bad year is also a cheaper year.
A 20% sales miss cuts NPV by 38%, not by 100%. Break even sales about €288,000
Raw materials fall from 34% to 32% to 30% of sales. Gross margin rises from 66% to 70% and the EBITDA margin from 31% to 35%. Our reading: a new kitchen wastes more stock at first, then learns.
EBITDA €188,000 in year 1, €237,708 in year 5
Customers pay on the spot, stock lasts 30 days and suppliers give 15 days. So the bar only finances about 15 days of stock: €8,500 in year 1, about 1.3% of sales. A shop with 90 day customers would need far more.
ONWC €8,500, then about €8,000 to €8,400
The premises cost €480,000, but the seller accepts two thirds a year later with no interest. Day one costs €160,000, and the bar's first year of trading has already brought in €133,100 by the time the €320,000 falls due.
Peak cash need €346,900, not €480,000
ROCE, profit after tax over the money invested, is 20.5% in year 1 and 44.3% by year 5, against a 10% cost of capital. In course terms that is margin times turnover: in year 5, 18 cents of profit per euro of sales, and €2.46 of sales per euro invested.
ROCE 20.5%, 26.4%, 34.6%, 42.9%, 44.3%
Year 3 (July 2029 to June 2030), sales €636,540. Cents per euro of sales, from the Income Statement sheet. The last bar is what is left for the owners after tax.
Rough daily figures: the case gives yearly sales only, with no opening days or seat count.
Beyond the DCF, investors want four things: the ask (up to €346,900, by June 2028), the downside (the stress tests and the five year case), who runs the bar, and why this location and brand will bring people in. The deck covers the first two with numbers; be ready to talk about the last two.
Open our Excel, Taktika_Barra_DCF.xlsx, next to this tab. Euros; year 1 is July 2027 to June 2028; every cash flow sits on 30 June.
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|
| Sales | 600,000 | 618,000 | 636,540 | 655,636 | 675,305 | 675,305 |
| Raw materials (% of sales) | 34% | 32% | 30% | 30% | 30% | 30% |
| Raw materials (COGS) | (204,000) | (197,760) | (190,962) | (196,691) | (202,592) | (202,592) |
| Gross margin | 396,000 | 420,240 | 445,578 | 458,945 | 472,714 | 472,714 |
| Staff (25%) | (150,000) | (154,500) | (159,135) | (163,909) | (168,826) | (168,826) |
| Franchise royalty (8%) | (48,000) | (49,440) | (50,923) | (52,451) | (54,024) | (54,024) |
| Other costs | (10,000) | (10,500) | (11,025) | (11,576) | (12,155) | (12,155) |
| EBITDA | 188,000 | 205,800 | 224,495 | 231,009 | 237,708 | 237,708 |
| Depreciation | (60,000) | (61,000) | (62,000) | (63,000) | (64,000) | (64,000) |
| EBIT | 128,000 | 144,800 | 162,495 | 168,009 | 173,708 | 173,708 |
| Tax (30%) | (38,400) | (43,440) | (48,748) | (50,403) | (52,112) | (52,112) |
| EBIAT (profit after tax, before financing) | 89,600 | 101,360 | 113,746 | 117,606 | 121,596 | 121,596 |
| EBITDA margin | 31.3% | 33.3% | 35.3% | 35.2% | 35.2% | 35.2% |
Excel: Income Statement rows 6 to 21 Year 6 is the first perpetuity year and copies year 5, depreciation included, as the case says.
| 30 Jun 2027 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|---|
| Capex (premises, equipment) | 480,000 | 8,000 | 8,000 | 8,000 | 8,000 | 64,000 | 64,000 |
| Depreciation | 60,000 | 61,000 | 62,000 | 63,000 | 64,000 | 64,000 | |
| Net noncurrent assets (NNCA) | 480,000 | 428,000 | 375,000 | 321,000 | 266,000 | 266,000 | 266,000 |
| Stock (30 days of COGS) | 0 | 17,000 | 16,480 | 15,914 | 16,391 | 16,883 | 16,883 |
| Suppliers (15 days of COGS) | 0 | (8,500) | (8,240) | (7,957) | (8,195) | (8,441) | (8,441) |
| Operating net working capital (ONWC) | 0 | 8,500 | 8,240 | 7,957 | 8,195 | 8,441 | 8,441 |
| Seller credit on the premises | (320,000) | 0 | 0 | 0 | 0 | 0 | 0 |
| Total Net Investment (TNI) | 160,000 | 436,500 | 383,240 | 328,957 | 274,195 | 274,441 | 274,441 |
| ROCE (EBIAT ÷ TNI) | 20.5% | 26.4% | 34.6% | 42.9% | 44.3% | 44.3% |
Excel: Balance rows 6 to 41 NNCA rolls forward as NNCA0 + investment minus depreciation = NNCA1, and TNI = NNCA + ONWC Formula sheet, Bloc 1. The seller credit has its own line because it is not financial debt FAQ 11.
| 30 Jun 2027 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|---|
| EBIAT | 0 | 89,600 | 101,360 | 113,746 | 117,606 | 121,596 | 121,596 |
| Plus depreciation | 0 | 60,000 | 61,000 | 62,000 | 63,000 | 64,000 | 64,000 |
| Less capex | (480,000) | (8,000) | (8,000) | (8,000) | (8,000) | (64,000) | (64,000) |
| Less increase in ONWC | 0 | (8,500) | 260 | 283 | (239) | (246) | 0 |
| Seller credit | 320,000 | (320,000) | 0 | 0 | 0 | 0 | 0 |
| Free cash flow (FCFF) | (160,000) | (186,900) | 154,620 | 168,030 | 172,368 | 121,350 | 121,596 |
| Terminal value | 1,215,955 | ||||||
| Discount factor at 10% | 1.0000 | 0.9091 | 0.8264 | 0.7513 | 0.6830 | 0.6209 | |
| Present value | (160,000) | (169,909) | 127,785 | 126,243 | 117,729 | 830,361 | |
| Cumulative FCFF | (160,000) | (346,900) | (192,280) | (24,250) | 148,117 | 269,467 |
Excel: Valuation rows 6 to 30 FCFF = EBIAT minus the increase in net investment Formula sheet, Bloc 4.
Year 1 is negative only because of the €320,000 payment to the seller. Year 5 dips because €64,000 is reinvested.
Terminal value = 121,596 ÷ 10% = 1,215,955 on 30 June 2032. Cross check with the formula sheet: TNI × ROCE ÷ WACC = 274,441 × 44.3% ÷ 10% gives the same number.
| 30 Jun 2027 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|---|
| EBIAT | 0 | 89,600 | 101,360 | 113,746 | 117,606 | 121,596 | |
| Plus depreciation | 0 | 60,000 | 61,000 | 62,000 | 63,000 | 64,000 | |
| Less capex (none in year 5) | (480,000) | (8,000) | (8,000) | (8,000) | (8,000) | 0 | |
| Less increase in ONWC | 0 | (8,500) | 260 | 283 | (239) | (246) | |
| Recovery of ONWC | 8,441 | ||||||
| Seller credit | 320,000 | (320,000) | 0 | 0 | 0 | 0 | |
| Project cash flow | (160,000) | (186,900) | 154,620 | 168,030 | 172,368 | 185,350 | 8,441 |
Excel: Valuation rows 33 to 49
Only the cost of capital table is in the Excel's Sensitivity sheet. The others come from the same model with one input changed. Change the cell on the Inputs sheet, read Valuation row 24, then change it back.
| Test | Input cell | Set it to | NPV |
|---|---|---|---|
| Cost of capital | B4 | 8% / 12% / 15% / 20% | 1,176,626 / 669,359 / 466,789 / 265,089 |
| Where NPV hits zero | B4 | 36% | about 0 |
| Year 1 sales | B19 | 480,000 / 540,000 / 660,000 / 720,000 | 536,613 / 704,412 / 1,040,008 / 1,207,806 |
| Break even sales | B19 | 288,122 | about 0 |
| Worst combined case | B4 and B19 | 20% and 480,000 | 102,543 |
| Sales growth | B20 | 0% / 6% | 719,074 / 1,038,252 |
| Raw materials | B22, B23 | 0% and 34% / 2% and 28% | 709,104 / 950,168 |
| Staff | B24 | 27% / 23% | 779,884 / 964,535 |
| Royalty | B25 | 10% / 6% | 779,884 / 964,535 |
| Tax | B5 | 35% / 25% | 789,244 / 955,176 |
| Premises price | B10 | 528,000 / 432,000 | 804,138 / 940,281 |
| Other costs | B26 | 15,000 / 5,000 | 831,267 / 913,153 |
The 56% IRR is not where NPV hits zero on slide 10. That chart recalculates the terminal value at each rate, so NPV reaches zero at about 36%. The IRR keeps every cash flow fixed.
| Question | Our choice | Why |
|---|---|---|
| Days in a year | 360 | The course convention for turnovers. |
| Stock and supplier days measured on | Raw materials (COGS) | Stock is held at cost and suppliers are paid for purchases Slides 1.1. Fashion Stores used sales only as a shortcut. |
| "Improved by 2%" in year 2 | 2 points: 34%, 32%, 30% | Only this reading reaches "then 30%" smoothly. |
| The seller credit | Its own line in TNI, not debt | No interest, no tax saving FAQ 11. |
| When working capital is first needed | End of year 1 | Cash flows sit at the end of each period Slides 2.4 Example 2.1. |
| First perpetuity cash flow | 30 June 2033 | The case text; FAQ 1's dates are garbled. |
| Year 5 capex | Exactly equal to depreciation | With g = 0, net investment can't grow Formula sheet. |
| Premises if the bar closes | Worth nothing | No price is given, so zero is the cautious choice. |
| Working capital if the bar closes | Recovered in June 2033 | Released the year after sales stop Example 2.1. |
The slides are light, so know the whole deck, not only your part. If someone gets stuck, anyone should be able to pick it up.
The name, the beach photo and the five of us. It sets the scene before a single number appears.
Why should we listen to three students?
Because the numbers don't depend on us being experienced: the brand, the recipes and the system come from the franchisor, and the data comes from the chef. What we bring is the plan, and we have tested it hard.
The answer first: invest. Four numbers carry the whole case, with one line saying it survives every stress test.
56% a year sounds too good to be true.
Part of it comes from the terminal value, the years after 2032. That's why we also show the MIRR, 42.5%, which reinvests the cash at 10%, and the five year case, where the IRR is still 26%.
Five parts and who presents each one: recommendation, business and profitability, cash flow and value, stress tests, then value drivers, cash needs and the ask.
How long will this take?
Under fifteen minutes, then questions.
Three blocks: the bar (franchise, opening date, location, 8% royalty), the investment (€480,000 premises, payment split, €8,000 of equipment a year) and our approach (five years in detail, July to June year, cash before financing at 10%).
Who would actually run the bar day to day?
The forecast pays for a full team through the staff line, €150,000 in year 1, and the franchise brings the recipes and the system. The case doesn't say how the founders would split the work or what they'd pay themselves, so that is something we would agree with you.
Six boxes: sales, raw materials, staff, royalty, other costs, working capital. Each has the number and the business reason. Depreciation and tax sit underneath.
Where does €600,000 in the first year come from?
It's the chef's own figure for this bar, and he runs the brand already. We don't take it on trust: slide 11 shows the NPV with sales 20% lower, and sales would have to halve before the bar stopped creating value.
Bars for EBITDA and profit after tax, year 1 to 5, with sales and the EBITDA margin under each year.
Why does profit growth slow down after year 3?
By year 3 the kitchen has reached 30% on raw materials, so from then on profit grows with sales, 3% a year, while other costs grow 5%.
The bridge from profit to cash, year by year: add back depreciation, take off investment and working capital, then the seller credit.
If the bar is profitable in year 1, why is cash negative?
Because that's the day we pay the seller the remaining €320,000. The bar itself makes €133,100 of cash in year 1.
Three steps: €121,596 a year from July 2032, divided by 10% gives €1,215,955 in 2032, discounted to €755,013 today. A bar splits the NPV: 13% from the first five years, 87% from the terminal value.
Isn't it dangerous that most of the value is so far in the future?
Yes, and that's why we test it twice: doubling the cost of capital still leaves €265,089, and valuing the bar as if it closed in 2032 still leaves €161,701.
NPV, IRR, MIRR and payback on the left; cumulative cash on the right, bottoming at (€346,900) in June 2028 and turning positive in year 4.
Which of the four numbers should we trust most?
The NPV: it says how much value the bar creates in euros at your 10%. The IRR and MIRR are for comparing with other deals, and the payback tells you how long your money is at risk.
NPV at 8%, 10%, 12%, 15% and 20%. Even at 20% it stays at €265,089. It only reaches zero at about 36%.
Why would the cost of capital change?
It's the return you ask for the risk you take. If you see this bar as riskier than we do, you'd ask for more. Even if you asked for twice as much, the bar would still create value.
NPV with year 1 sales 20% and 10% lower and higher. Every later year moves with it.
What if the first season is a flop?
Even if every year were 20% below plan, the NPV would still be €536,613. Sales would have to halve, to about €288,000 a year, before the bar stopped creating value.
A grid: four sales levels against four costs of capital. All sixteen NPVs are positive. Worst case €102,543.
What would it take to lose money?
At your 10%, sales would have to fall by more than half. Even at 20%, they would have to fall by about a third.
A tornado chart: each assumption moved on its own, downside bars left of the €872,210 base line and upside bars right.
Which assumption keeps you up at night?
Sales, because that's the business risk we can't control. The cost of capital moves the value more, but that's your required return, not something the bar does.
Two panels: if the bar keeps operating (NPV €872,210, IRR 56.3%, MIRR 42.5%, payback 3.1 years) and if it closes on 30 June 2032 (€161,701, 26.3%, 17.6%, 3.1 years).
Why would anyone close a profitable bar?
They probably wouldn't. It's the cautious way to show the deal works without counting on anything after 2032.
Left: four stress test results. Right: a bridge from €160,000 paid on day one, plus €320,000 to the seller, less €133,100 from year 1, to the €346,900 peak.
Do you need all €346,900 on day one?
No. €160,000 is needed by 30 June 2027 for the keys. The rest is needed by 30 June 2028, when the seller is paid, and the bar's first year covers €133,100 of it.
The summary sentence: at most €346,900 invested, money back early in year four, €872,210 of value at 10%. It holds up under 20% lower sales, a doubled cost of capital or a closure after five years. Then the ask.
What do we get in return?
That's what we'd like to agree with you. What we can show is that at your 10% the bar's future cash flows are worth €1,032,210 on the day we open, against €160,000 put in that day.
Your lines below are the speaker notes from the deck. As written they take about 60 seconds, so use the points under each slide to talk about the business in depth and fill your share of the 15 minutes, about three.
Good evening, and thank you for meeting us. Tonight we would like to show you why a new Taktika Barra on Sant Miquel beach would be a sound investment.
Why should we listen to three students?
Because the numbers don't depend on us being experienced: the brand, the recipes and the system come from the franchisor, and the data comes from the chef. What we bring is the plan, and we have tested it hard.
Our recommendation is to invest. At a 10% cost of capital the bar would be worth €872,210 more than it costs, it would return 56% a year, and the money would be back early in the fourth year. The most cash it would ever need is €346,900, in June 2028. The rest of the presentation shows where these numbers come from and how robust they are.
56% a year sounds too good to be true.
Part of it comes from the terminal value, the years after 2032. That's why we also show the MIRR, 42.5%, which reinvests the cash at 10%, and the five year case, where the IRR is still 26%.
Bruno will start with the business and its profitability, Nico will turn that profit into cash and a valuation, and Jakob will stress test the result. Yuval will then look at what drives the value and how much cash the bar would need, and close with what we are asking for.
How long will this take?
Under fifteen minutes, then questions.
Reading the slide out loud. The investors can read it; tell them why the number is what it is.
Your lines below are the speaker notes from the deck. As written they take about 60 seconds, so use the points under each slide to talk about the business in depth and fill your share of the 15 minutes, about three.
Taktika Barra is the franchise of a well known Basque chef, and ours would sit right on Sant Miquel beach next to the W Hotel. The premises cost €480,000, but because the seller accepts two thirds of the price a year later, only €160,000 would leave on day one. Throughout, we look at cash before financing, discounted at 10%.
Who would actually run the bar day to day?
The forecast pays for a full team through the staff line, €150,000 in year 1, and the franchise brings the recipes and the system. The case doesn't say how the founders would split the work or what they'd pay themselves, so that is something we would agree with you.
These are the assumptions behind the forecast. Sales would start at €600,000 and grow 3% a year, and because most costs are a share of sales, a weaker year would also cost less. Raw materials would fall from 34% to 30% of sales as the kitchen settles in.
Where does €600,000 in the first year come from?
It's the chef's own figure for this bar, and he runs the brand already. We don't take it on trust: slide 11 shows the NPV with sales 20% lower, and sales would have to halve before the bar stopped creating value.
On these assumptions the bar would be profitable from its first year. Profit after tax would grow from €89,600 to €121,596, helped by a margin that improves from 31% to 35%. Next, Nico shows how that profit turns into cash.
Why does profit growth slow down after year 3?
By year 3 the kitchen has reached 30% on raw materials, so from then on profit grows with sales, 3% a year, while other costs grow 5%.
Reading the slide out loud. The investors can read it; tell them why the number is what it is.
Your lines below are the speaker notes from the deck. As written they take about 50 seconds, so use the points under each slide to talk about the business in depth and fill your share of the 15 minutes, about three.
Free cash flow adds back depreciation and subtracts what we invest. The first year would be negative because of the €320,000 payment to the seller, but from the second year on the bar would generate between €121,000 and €172,000 a year.
If the bar is profitable in year 1, why is cash negative?
Because that's the day we pay the seller the remaining €320,000. The bar itself makes €133,100 of cash in year 1.
Beyond 2032 we assume the bar simply carries on, earning what it earned in year 5 and reinvesting what wears out. Valued at 10%, that stream would be worth €755,013 today, which is 87% of the NPV, so it is the first thing Jakob tests.
Isn't it dangerous that most of the value is so far in the future?
Yes, and that's why we test it twice: doubling the cost of capital still leaves €265,089, and valuing the bar as if it closed in 2032 still leaves €161,701.
All four measures point the same way. The NPV would be €872,210 and the payback would come early in year four. The IRR of 56% is high partly because of the terminal value, which is why we also show the MIRR of 42% and, later on, a five year scenario.
Which of the four numbers should we trust most?
The NPV: it says how much value the bar creates in euros at your 10%. The IRR and MIRR are for comparing with other deals, and the payback tells you how long your money is at risk.
Reading the slide out loud. The investors can read it; tell them why the number is what it is.
Your lines below are the speaker notes from the deck. As written they take about 50 seconds, so use the points under each slide to talk about the business in depth and fill your share of the 15 minutes, about three.
Since so much of the value sits in the terminal value, the cost of capital is the first test. Even if it doubled to 20%, the NPV would still be €265,089, and it would only reach zero at a rate of about 36%.
Why would the cost of capital change?
It's the return you ask for the risk you take. If you see this bar as riskier than we do, you'd ask for more. Even if you asked for twice as much, the bar would still create value.
Sales are the main business risk. A weaker first year would carry through every later year, but even with sales 20% below plan the NPV would stay above half a million euros. Sales would have to fall by about half before the investment stopped creating value.
What if the first season is a flop?
Even if every year were 20% below plan, the NPV would still be €536,613. Sales would have to halve, to about €288,000 a year, before the bar stopped creating value.
Putting both stresses together, every combination remains positive. In the worst case, with sales 20% lower and a 20% cost of capital, the NPV would still be €102,543.
What would it take to lose money?
At your 10%, sales would have to fall by more than half. Even at 20%, they would have to fall by about a third.
Reading the slide out loud. The investors can read it; tell them why the number is what it is.
Your script, with the words to lean on in bold. About three and a half minutes in total. Read it out loud twice with a timer.
NPV in thousands of euros with one assumption changed and the rest at plan. Left of centre is the downside, right is the upside.
Thanks, Jakob. Jakob just showed what happens when things go wrong together. I'll take them one at a time, so we can see which assumptions actually move the value.
The vertical line in the middle of the chart is our base case, €872,210. The grey bars to the left of it show what happens if an assumption goes against us, and the orange bars to the right show what happens if it goes our way.
Two things stand out right away here. The first one, which is the top bar, is the cost of capital. If it goes from 8% up to 12%, the value drops from €1.18 million all the way to €669,000. That's because most of the value exists in the years after 2032, and the further away the money is, the more the rate matters. The second one is sales, which you can see in the next two bars, both what we sell in the first year and also how fast it grows.
Everything further down the chart matters a lot less since raw materials, staff, the royalty, tax, the price of the premises and other costs each move the value by less than €200,000. And even the worst one still leaves us with more than €660,000.
Now, a lot of that value depends on the bar still running after 2032, and we understand that you might not want to count on that. So we also looked at what happens if we close the bar in June 2032, with no terminal value at all.
The panel on the left shows the numbers if the bar keeps going, and the panel on the right shows them if it closes in June 2032. So looking at the right panel, even if it closed it would still create €161,701 on top of your 10%, with an IRR of 26% and also a MIRR of almost 18%. The payback stays the same at 3.1 years in both panels, since the money is already back before the two cases start to differ.
And this is the cautious version here, since, as the note at the bottom says, we count the premises as worth nothing at the end, so whatever we could sell them for would be extra.
So the value holds up. The four numbers on the left sum up Jakob's stress tests. None of the three NPVs goes negative, and the last number shows that sales would have to drop by more than half before that happened.
What we actually need to plan for is cash, and the date that matters here is 30 June 2028, which is what the chart on the right shows. The first bar is the €160,000 we'd pay when we get the keys in June 2027, and the second bar is the remaining €320,000 we'd pay the seller a year later. The light grey bar is the €133,100 the first year of business would bring in, so the orange bar at the end shows the lowest point, where we'd need €346,900. After that the bar pays for itself, and early in year four everything is back.
That means the funding needs to cover up to €346,900, and it has to be in place by June 2028.
So, to sum up. With at most €346,900 invested, you'd have your money back early in year four, and the bar would create €872,210 of value at your 10%.
It still holds up if sales come in 20% lower, if the cost of capital doubles, and even if we closed after five years.
We believe in this enough to put our own money in, and we would really like you to join us. Thank you, and we're happy to take any questions now.
Reading every number on slide 13. Name the two big drivers, sweep over the rest in one sentence, move on.
The short definition is always visible. Open More detail & examples for the course's own worked example.
The course rearranges the balance sheet into what the business needs to operate, Total Net Investment (TNI = net noncurrent assets + operating net working capital), and who pays for it: equity and financial debt.
Fashion Stores: net noncurrent assets 80 plus operating working capital 120 gives a net investment of 200, financed by 100 of equity and 100 of financial debt.
TNI is €160,000 on day one (the premises less the €320,000 owed to the seller), €436,500 after year 1, and settles at €274,441 from year 5.
Most of the money tied up in this bar is the building. Working capital is close to nothing.
Putting the €320,000 seller credit with the bank debt. It carries no interest, so it reduces the investment instead (FAQ 11).
ONWC is the money tied up in running the business day to day: stock plus what customers owe, minus what we owe suppliers. Cash and interest bearing debt are left out.
Fashion Stores needs operating working capital of 21.67% of its sales every year.
Customers pay cash, stock is 30 days and suppliers give 15, so ONWC is €8,500 in year 1, about 1.3% of sales.
Customers pay us on the spot and we pay our suppliers two weeks later, so the bar barely needs any working capital.
Measuring stock and supplier days on sales. They are measured on cost, which is what the stock and the purchases are worth.
ROCE is profit after tax before interest (EBIAT) over the money invested (TNI). ROE is profit over equity. Debt cheaper than the ROCE lifts ROE: ROE = ROCE + FD/E × (ROCE minus i × (1 minus t)).
Fashion Stores: EBIT 36, tax one third, investment 200, so ROCE 12%. With 100 of debt at 6%, ROE = 12% + 8% = 20%. The "investing with a friend" version gives the same 20 million on 100.
ROCE rises from 20.5% in year 1 to 44.3% in year 5: 18 cents of profit per euro of sales times €2.46 of sales per euro invested.
By year 5, every euro tied up in this bar would earn 44 cents a year after tax, against the 10% you ask for.
Quoting an ROE. We have no financing plan, so there is no ROE to show (FAQ 10).
A business can only grow by investing more. The formula sheet links them: g = increase in net investment ÷ net investment = b × ROCE, where b is the share of profit reinvested.
The case itself: to keep net assets from shrinking, capex in the year before the perpetuity must at least equal that year's depreciation.
Year 5 capex is €64,000, exactly the depreciation, so TNI stays at €274,441 and g = 0.
From 2032 the bar would simply replace what wears out and pay out everything it earns.
Assuming growth after 2032 without the extra investment that growth needs.
Only the cash flows that change because of the decision count. Opportunity costs go in, sunk costs stay out, and financing costs stay out because the discount rate already covers them.
Market research that cost €300,000 has to be paid either way, so it doesn't enter the project's cash flows.
Every flow in the model only exists if the bar opens. No interest is subtracted: the 10% does that job.
These are the cash flows of the bar itself, before anyone's financing.
Subtracting interest and then also discounting at the cost of capital. That counts the cost of money twice.
Depreciation is not a cash payment, but it lowers taxable profit, so it saves real tax. That's why free cash flow adds it back after tax.
Two firms with EBITDA of 1,000: A doesn't depreciate and pays 300 of tax; B depreciates 300 and pays only 210. B has the lower profit but keeps 90 more cash.
The premises depreciate €60,000 a year, which saves €18,000 of tax every year.
Depreciation costs us nothing in cash and saves us €18,000 of tax a year.
Forgetting to add depreciation back, which would understate every cash flow by about €60,000.
Only the change in working capital is a cash flow: an increase uses cash, a decrease releases it. When a project ends, all of it comes back.
Sales of 0, 100, 500, 300, 0 with ONWC at 30% of sales: working capital of 0, 30, 150, 90, 0, so cash goes out early and all comes back by the end.
Minus €8,500 in year 1, then small ups and downs. In the five year case the €8,441 comes back in June 2033.
The bar needs less than €9,000 of working capital, and we get it back if we ever close.
Taking the level of ONWC as the cash flow instead of the change.
A euro today is worth more than a euro later, because today's euro can be invested. Discounting turns future cash into today's money: PV = CF ÷ (1 + r)^t.
€105,000 in one year at 7% is worth €98,130.84 today: borrow that now and repay €105,000 a year later.
Every flow is discounted to 30 June 2027. The terminal value is multiplied by 0.6209.
All our numbers are in today's money, at the 10% you require.
Discounting the day one payment. Flows on 30 June 2027 are already in today's money.
A perpetuity is a cash flow that lasts for ever. Its value one period before the first payment is C ÷ (r minus g). The terminal value uses it for everything after the detailed forecast.
The case's own rule: the perpetuity starts with the year after the forecast, whose P&L copies year 5, depreciation included.
Year 6 cash flow €121,596 ÷ 10% = €1,215,955 on 30 June 2032, worth €755,013 today, 87% of the NPV.
If the bar simply kept doing what it does in year 5, that stream would be worth €755,013 today.
Discounting the terminal value six years instead of five, or dividing year 5 cash (€121,350, after the big reinvestment) instead of year 6.
Payback is how long it takes to get the money back. It is easy to explain and measures how long the money is at risk, but it ignores everything after that point.
(10) 5 5 5 and (10) 2 8 1,000 both pay back in 2 years, though the second is far better. So does (100) 90 10 against (100) 10 90.
Cumulative cash is (24,250) after year 3 and year 4 brings 172,368: payback 3.14 years. Discounted: 3.64 years.
Your money would be back early in the fourth year.
Using payback to compare value. It says nothing about the years after 2030, which is most of this bar's value.
NPV is the value a project adds in today's money after covering the investment and the required return. Positive means accept.
(10) 5 5 5 at 10% gives an NPV of 2.43: you could borrow 12.43 today, pay back the loan and its interest with the project's cash, and keep 2.43 more than the 10 you needed.
NPV €872,210: the bar returns every euro put in, plus 10% a year, plus €872,210 of extra value today.
After paying you 10% a year on every euro, the bar still creates €872,210 of value.
Calling the NPV profit. It is value in today's money, after the cost of capital.
The IRR is the rate that makes the NPV zero. It assumes the cash coming in is reinvested at the IRR itself. The MIRR reinvests it at the cost of capital instead, which is more realistic.
(10) 5 5 5: IRR 23%. Reinvested at 10%, the 5s grow to 16.55 by year 3, so MIRR = (16.55 ÷ 10)^(1/3) minus 1 = 18.28%.
IRR 56.3%, MIRR 42.5%. Five year case: IRR 26.3%, MIRR 17.6%.
Even reinvesting every euro at only 10%, the return would be 42% a year.
Presenting the 56% as what an investor would really earn. It assumes every euro coming back is reinvested at 56%.
When they disagree, NPV wins. IRR can mislead on reinvestment, on the size of a project and when cash flows change sign more than once.
Scale: (10) then 12 is 20%; (100) then 115 is 15%, but at 10% the second creates far more value. The oil well, (1,800), 20,000, (20,000), has two IRRs, 11% and 900%, and an NPV of minus 147 at 10%.
Our flows go negative, negative, then positive for ever: one change of sign, so one IRR. We lead with the NPV anyway.
We judge it on value created, the NPV. The IRR is there to compare with other deals you see.
Ranking deals by IRR alone.
A project that ends recovers its working capital and whatever its assets sell for. A business that carries on is valued with a perpetuity instead. They give different values.
Example 2.4: two firms sell an asset with a book value of 60. One sells at 60 and pays no tax; the other sells at 70 and pays tax only on the 10 of gain.
Going concern €872,210; closing on 30 June 2032 €161,701, with the premises at zero and €8,441 of working capital recovered.
Even if we closed the bar after five years and got nothing for the premises, it would still create €161,701.
Adding a terminal value and also recovering working capital at the end. You get one or the other.
FCFF is the cash the business makes for everyone who funds it. FCFE is what is left for shareholders after interest and debt flows. When debt is cheaper than the project return, the shareholder IRR beats the project IRR.
The slides compare project and shareholder payback and IRR for the same project with and without debt.
We use FCFF and the 10% because the case gives no financing plan, and the seller credit isn't financial debt.
We valued the bar itself. How you and we split it would be the next conversation.
Discounting FCFE at the WACC, or FCFF at the cost of equity. Each flow goes with its own rate.
The WACC blends what shareholders require and what lenders charge after tax, weighted by how much each provides. It is the rate for discounting FCFF.
60% equity at 12% and 40% debt at 6% with 35% tax: WACC 8.76%. Investing with a friend, 50/50, Ke 12%, Kd 6%, tax one third: 8%.
The case gives 10%, the return the investors require. Our tests run from 8% to 20%.
We used the 10% you asked for, and showed what happens up to 20%.
Counting the seller credit as cheap debt that lowers the WACC. It isn't financial debt.
The cost of equity is the risk free rate plus beta times the market premium: Ke = Rf + β(Rm minus Rf). Beta only counts the risk you can't diversify away.
A publisher: four listed booksellers average a beta of 1.10 with 18.21% debt to equity, an asset beta of 0.98; relevered at 50/50 that is 1.62, so Ke = 4.5% + 1.62 × 4% = 10.98%.
If an investor asks where 10% comes from: you would take betas of listed restaurant companies, unlever them and relever them for this bar.
The 10% is your required return. If you wanted to check it, we would start from listed restaurant groups.
Using a listed company's equity beta directly, without unlevering for its debt.
Adding debt first lowers the WACC, because interest saves tax, then raises it, because the risk of distress pushes up the cost of both equity and debt.
In the course example the WACC moves 10%, 9.32%, 8.90%, then back up to 9.68% as debt rises.
The seller credit is the cheapest money in the deal: no interest at all. It is not financial debt, so it brings no tax saving either.
Two thirds of the premises would be paid a year later, interest free.
Assuming more debt always helps.
Cover the answer and say yours out loud first. One or two sentences, a number and a reason.
It's next to the W Hotel on Sant Miquel beach, which the case calls one of the most fashionable places in the city. Hotel guests and beachgoers would be on the doorstep, which is why year 1 can start at €600,000.
The case has no footfall or competitor data, so we don't claim any. We test what happens if sales come in 20% lower: €536,613 of value.
The 8% royalty, €48,000 in year 1, buys a famous chef's name, his recipes and his system, so the bar starts with customers and a proven kitchen.
Even if the royalty were 10%, the NPV would be €779,884.
The case gives yearly sales, so the €600,000 already includes the quiet months. What a yearly model can't show is cash inside the year.
The timing helps: the big payment to the seller is due in June 2028, after a full first season.
The staff budget, 25% of sales or €150,000 in year 1, pays for a full team, and the franchise provides the recipes and the system.
The founders' own roles and pay aren't in the case. Say you would agree them with the investors.
Raw materials fall from 34% to 32% to 30% of sales, the chef's own forecast. A new kitchen wastes more at first and gets better.
If they stayed at 34%, the NPV would be €709,104.
Raw materials, staff and the royalty, 63% of sales, fall with sales. So profit falls far less than revenue: a 20% sales miss cuts the NPV by 38%, not 100%.
Break even sales are about €288,000 a year, roughly €800 a day.
The going concern counts the years after 2032 through the terminal value, €755,013 today. The five year case counts nothing after 2032 except the €8,441 of working capital.
Both are positive. The five year case also values the premises at zero.
Growth needs extra investment (g = b × ROCE), and the case gives none after year 5. Zero growth is the cautious choice.
Year 5 reinvestment equals depreciation, so the bar keeps its size for ever.
It carries no interest and brings no tax saving, and the professor's FAQ says this kind of financing isn't financial debt. So it is a later payment for the premises.
That's why it appears in the cash flows, in June 2028, and not in the cost of capital.
It isn't a cash payment. It only lowers taxable profit, which saves €18,000 of tax a year.
Course Example 2.2: the firm that depreciates keeps more cash.
It's the rate that makes the NPV zero, and much of it comes from the terminal value. Reinvesting at 10%, the MIRR is 42.5%; with no terminal value, the IRR is 26%.
That's why we lead with the NPV.
€160,000 on day one plus €320,000 to the seller a year later, minus €133,100 of cash from the first year of trading.
It's undiscounted cash, the most money that would ever be out at once.
It's the convention the course uses for turnover days. With 365, working capital would be about €100 lower and the NPV would move by about as much.
Stock and supplier days are measured on the cost of sales.
Sales: what we sell in year 1 and how fast it grows. The cost of capital moves the value more, but that's your required return, not the business.
Slide 13 ranks them. Every single test still leaves more than €660,000.
The NPV would still be €265,089. It only reaches zero at about 36%.
At 20%, sales would also have to fall about a third before the value disappeared.
With sales 20% lower and a 20% cost of capital, the NPV is still €102,543.
All sixteen combinations on slide 12 are positive.
At 10% of sales the NPV would be €779,884. The case gives no contract terms, so we haven't assumed any protection.
Staff costs work the same way: 27% of sales gives the same €779,884.
The five year case already values them at zero. The going concern doesn't sell them at all.
Book value left in June 2032 would be €202,000.
At €528,000, 10% more, the NPV would be €804,138.
It is one of the smaller bars on slide 13.
€160,000 by 30 June 2027 for the keys. Up to €346,900 in total by 30 June 2028, when the seller is paid.
After that the bar funds itself, including the €8,000 of equipment each year.
The bar would pay back everything early in year four: 3.1 years, or 3.6 discounted at 10%.
In cash terms, cumulative cash turns positive during year 4, by June 2031.
The case doesn't set terms, so that's for us to agree. What we can show is the size of the pie: €872,210 of value at your 10%.
At 10%, the bar's future cash flows are worth €1,032,210 on opening day, against €160,000 put in that day.
We say we would put our own money in, but the case doesn't give an amount. Be honest: the split is part of the conversation.
Don't invent a number on the spot.
It's the return the investors require, given in the case. It works like a WACC: the rate that pays everyone who funds the bar.
To check it, you'd use CAPM with betas from listed restaurant companies, unlevered and relevered.
The case gives no financing, and FAQ 10 says nobody asked how to finance it. FCFF values the business before anyone's financing.
FCFE would need a debt plan, and the seller credit isn't financial debt.
The case asks for a perpetuity from 2032 and explains how to build it. We also show the five year case because FAQ 2 points out the two give different values.
Both are positive.
NPV. The course shows IRR can mislead on scale and on flows that change sign more than once. Ours only change sign once, so the IRR is valid, but NPV is the decision rule.
The oil well example in Slides 2.8b has two IRRs and a negative NPV.
A famous chef's tapas brand, on one of Barcelona's most fashionable beaches, next to the W Hotel.
Most of our costs move with sales, so a slow year is also a cheaper year.
Customers pay cash and suppliers give us 15 days, so the bar ties up less than €9,000.
The seller lets us pay two thirds a year later, interest free, so day one costs €160,000, not €480,000.
Most of the value is after 2032, so we tested it twice: at twice the rate, and with the bar closing.
Up to €346,900, in place by June 2028, back early in year four.
Built from the Taktika Barra case and the professor's FAQ, the Corporate Finance slides for Blocks 1 to 3, the formula sheet, our Excel model and our deck. Figures marked rough are our own estimates.