Case Detail

Case Summary

Teuer Furniture (A): Discounted Cash Flow Valuation

Case Number: 5-313-509(A), Year Published: 2014, Revision Date: October 17, 2017

HBS Number: KEL778

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Key Concepts

Cash Flow Analysis, Entrepreneurial Finance, Financial Statements, Growth Strategy, Private Equity, DCF Valuation

Abstract

Teuer Furniture is a privately owned, moderately sized chain of upscale home furnishing showrooms in the United States. The firm survived the economic recession and by the end of 2012, it has regained its financial footing. Now that the firm is more secure financially, some of its long-term investors have asked to cash out their investments. This will be the first time that Teuer has repurchased its equity; the company has paid dividends since 2009. Chief financial officer Jennifer Jerabek and her team have been given the task of valuing Teuer using a discounted cash flow approach. The discount rate is given in the case, and the students need to build a pro forma income statement, balance sheet, and cash flow statement and then calculate a per-share value for Teuer.

Learning Objectives

  • Estimate firm value using a discounted cash flow approach
  • Construct firm-level estimates of the pro forma income statement, balance sheet, and cash flow from assets based on store-level estimates
  • Recognize how forecasts of revenues, costs, and capital investment are constructed, how the individual estimates relate to each other, and how the forecasts depend upon the underlying economics of the business
  • Evaluate and defend the validity of the firm's forecasts and the valuation model

Number of Pages: 22

Extended Case Information

Teaching Areas: Finance

Teaching Note Available: Yes

Geographic: United States

Industry: Furniture Retail

Organization Name: Fictional

Organization Size: Medium

Decision Maker Position: Chief Financial Officer

Decision Maker Gender: Female

Year of Case: 2012