Student capstone packet — Apex Fire & Security
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 |
|---|---|
| Reported EBITDA | 710,000 |
| Officer compensation | 240,000 |
| Replacement manager | 180,000 |
| Personal | 20,000 |
| Exceptional repair | 30,000 |
| Rent increase | 20,000 |
| Revenue | 4,800,000 |
| Selected EV | 3,800,000 |
| Senior debt | 2,800,000 |
| Seller note | 300,000 |
| Rate | 0.1 |
| Months | 120 |
| Tax | 0.25 |
| DA | 80,000 |
| Maintenance CapEx | 80,000 |
| Annual NWC | 20,000 |
| Opening cash | 200,000 |
| Legal | 120,000 |
| QoE | 40,000 |
| Other fees | 23,750 |
| Adjustment escrow | 100,000 |
| Indemnity escrow | 190,000 |
| Basket | 25,000 |
| Claim | 70,000 |
| Cap | 380,000 |
| Covenant | 1.25 |
| Guarantee | 0.75 |
| Customer loss fraction | 0 |
Use fictional comps A EV2,520,000/EBITDA600,000; B 3,800,000/800,000; C 5,250,000/1,000,000; D 3,150,000/700,000. Customer revenue 960,000, contribution45%, avoidable overhead72,000. Recurring revenue2,880,000 at55% gross margin and project1,920,000 at35%.
NWC reference months are 360k,390k,410k,430k,450k,480k. Estimated accounts AR590k/inventory175k/prepaid30k/AP225k/accrual85k/deferred95k. Final closing accounts570k/165k/30k/230k/90k/105k. Target uses the same definition including full-face deferred revenue. Restore all missing NWC; do not treat price reduction as free cash.
SBA fee assumption: standard75% guaranty and FY2027 applicable large-loan brackets, no exception; fees include120,000 legal,40,000 QoE, calculated guaranty fee and23,750 other reviewed costs. Additional initial bank cash200,000 is separate from NWC restoration. Disclosed seller-funded escrow mechanics require lender/counsel approval. True-up delivery within90 days is a negotiated assumption. Fixed300,000 seller note is full standby, non-interest-bearing; no earnout or seller rollover.
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. Undefined EV/equity basis, duplicated true-up or recovery, unsupported seller proceeds, ineligible SBA earnout or concealed cash-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.