I have a start-up company with 100M in assets... and 50M in debt. The assets are strt-lined for 10 yrs, the debt matures in 10 yrs.
So when I did a quick and dirty model I just modeled it as a runoff... took assets and debt out to year 10, assumed a salvage value for the assets, taxed it, paid off any outstanding debt and liab, and distributed the remaining proceeds + cash to equity holders... that gave me an IRR. But if I refin the debt once its due, and buy new assets... my IRR is minuscule... so I need an exit multiple/perpetuity.... BUUUUT....
How would I even normalize my yr 10 cash-flows?
The issue is my 50M debt is an ABL tied to the 100M assets. As a result of the depreciation, the debt has a mandatory amortization. So what is my normalized interest expense, considering in yr 1 I have 100M in debt and year 9 I have 10M in debt?
I have a feeling I'm overlooking something really straight-forward.
Not sure what you need to do since I can't see the model, but I am pretty sure you are running your interest expense from your TOTAL DEBT not your CPLTD, that may be why you have such high debt in the earlier years.
As far as your 10-yr CF's go, apply a multiple at the end of those to get a TV..look at a couple of comps.
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