Instructor capstone solution — Vanguard Industrial Machining

Instructor version. Grade reasoning and live formulas before comparing outputs. Do not award an 80-point pass if a critical failure remains. A decline supported by the stated economics can receive full marks.

Independently calculated checkpoints

{
  "normalization": 616000,
  "tax_endpoint": 255000,
  "year1": {
    "year": 1,
    "revenue": 4725000.0,
    "ebitda": 646800.0,
    "da": 160000,
    "capex": 220000,
    "interest": 56000.0,
    "tax": 107700.0,
    "ni": 323100.0,
    "ar": 630000.0,
    "inventory": 525000.0,
    "prepaid": 42000.0,
    "ap": 367500.0,
    "accrual": 157500.0,
    "nwc": 672000.0,
    "delta_nwc": 32000.0,
    "ocf": 451100.0,
    "cash": 211100.0,
    "ppe": 960000.0,
    "debt": 600000.0,
    "equity": 1243100.0,
    "assets": 2368100.0,
    "claims": 2368100.0,
    "check": 0.0
  },
  "year2": {
    "year": 2,
    "revenue": 4961250.0,
    "ebitda": 679140.0,
    "da": 170000,
    "capex": 230000,
    "interest": 48000.0,
    "tax": 115285.0,
    "ni": 345855.0,
    "ar": 661500.0,
    "inventory": 551250.0,
    "prepaid": 44100.0,
    "ap": 385875.0,
    "accrual": 165375.0,
    "nwc": 705600.0,
    "delta_nwc": 33600.0,
    "ocf": 482255.0,
    "cash": 243355.0,
    "ppe": 1020000.0,
    "debt": 500000.0,
    "equity": 1468955.0,
    "assets": 2520205.0,
    "claims": 2520205.0,
    "check": 0.0
  }
}

The calculations originate in curriculum.finance, independently of Excel formulas. The instructor workbook is a separate linked solution. Reconcile any difference using units, timing, tax convention, source perimeter and rounding; do not overwrite a failing formula with this number.

Solution method and assessment

Correct current-period phantom inventory once in historical earnings and opening equity. Forecast two linked years: DA 160,000/170,000, CapEx 220,000/230,000, growth 5%, interest on opening debt and current cash taxes at the hypothetical buyer rate.

Also run the chapter downside: Year 1 EBITDA lower by 80,000, ending AR higher by 50,000, and cash CapEx higher by 30,000, with no change to current DA, interest, principal or distributions.

Inspect the supporting schedules in order: source assumptions, operational or transaction drivers, cash implications, claims allocation, checks and recommendation. Require the learner to explain why an input change moves the answer. Review all five rubric dimensions separately. An unbalanced opening/forecast balance sheet, cash plug, repeated inventory loss, or undisclosed cash breach is critical.

The full worked chapter supplies the narrative reasoning. The student packet withholds these completed results. Native Excel/LibreOffice recalculation remains a separate compatibility check from the available formula-engine tests.