Student capstone packet — Precision Valve & Actuator
Fictional case; student version; units USD. The chapter is a worked teaching walkthrough. This packet and learner workbook are the independent construction assessment. Do not consult the solution until submitting your model and recommendation. Source inputs are stipulated, not verified observations about an actual company.
Operating and transaction source packet
| Source assumption | Value |
|---|---|
| Purchase EV | 5,000,000 |
| Legal | 100,000 |
| Diligence | 50,000 |
| Other fees | 40,000 |
| Opening cash | 200,000 |
| Closing NWC | 100,000 |
| Senior debt | 4,000,000 |
| Seller note | 400,000 |
| Annual rate | 0.1 |
| Months | 120 |
| Guarantee | 0.75 |
| Minimum injection | 0.1 |
| Tax | 0.25 |
| Revenue | 8,000,000 |
| Variable cost ratio | 0.55 |
| Fixed costs | 2,200,000 |
| Growth | 0.03 |
| DA | 200,000 |
| Maintenance CapEx | 200,000 |
| Annual NWC | 50,000 |
| Exit multiple | 4 |
| Exit fee | 0.03 |
| Cash covenant | 1.25 |
| Minimum cash | 200,000 |
| Shock revenue loss | 0 |
| Rate stress | 0.12 |
| Reset after Year 1 | 0 |
Build 120 monthly senior periods, aggregate annual debt service, model five-year taxes, CFADS and retained cash. No interim distributions; non-interest-bearing seller note remains full standby until permitted payoff. Exit Year 5 at 4x EBITDA with 3% costs.
Stress revenue by 10%, 20%, 30% while fixed costs remain fixed in Year 1. Derive 1.25x, 1.15x and 1.0x CFADS thresholds; distinguish the EBITDA-based historical test.
Required model and written deliverables
Construct every relevant sheet in the learner workbook, with live formulas, visible units, linked supporting schedules and checks. Submit a three-to-five-page memorandum, assumption/evidence register, base case and downside, plus a model-defense note explaining one controlled input change and its consequences. Identify which facts must be verified before a real bid or loan commitment.
Independent grading rubric
| Dimension | Points | Full-credit standard |
|---|---|---|
| Source and assumption reconstruction | 20 | Correct perimeter, periods, units and documented unresolved facts |
| Formula construction and schedule links | 30 | Reproducible equations; no copied solution outputs or plugs |
| Reconciliation and diagnostic checks | 20 | All critical identities demonstrated and failures explained |
| Downside and acquisition judgment | 20 | Coherent stress, funding implications and supported recommendation |
| Communication and evidence | 10 | Reviewable memo, limitations, sources and decision gates |
Pass requires at least 80/100 and all critical checks. Unfunded uses, hidden senior balloon, omitted seller claim, duplicated NWC, ineligible earnout or concealed covenant failure is critical. A well-supported recommendation to decline earns full credit; a desired deal outcome is not the grading criterion. Legal, tax and lending judgments require adviser review, not a spreadsheet certificate.