| Course | FI499 Bachelor's Capstone in Finance |
|---|---|
| Unit | Unit 5 |
| Paper type | Valuation model |
| Length | About 1,090 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | BS in Finance |
| Updated | October 2026 |
Free sample paper for FI499 Unit 5
$22.54 Million, Every Driver Traced: A Unit 5 Capstone Valuation Model of a Six-School Swim Academy
[Student Name]
Purdue University Global
FI499: Bachelor's Capstone in Finance
Unit 5 Valuation Model
[Instructor Name]
[Date]
Tidewell, Paddlemark and every figure are composite; the books and article cited are real.
Method
The model discounts Paddlemark's expected free cash flows to Tidewell at 10.5 percent (A10), the rate built in Unit 3 from Tidewell's cost of debt and required return on equity. Free cash flow is EBITDA less tax and capital spending; working capital is held flat (A9). Five years are forecast explicitly, followed by a terminal value growing at 2.5 percent a year (A3). Discounted cash flow fits a decision about buying a stream of future cash, and research comparing such forecasts with actual deal prices found that well-built cash flow valuations track transaction values about as well as market multiples do (Kaplan & Ruback, 1995).
The Forecast
Revenue. Year one falls 2 percent from $8.40 million to $8.23 million as some families leave during the rebrand (A1). Growth then runs 6, 5, 4 and 3 percent (A2), reaching $8.73 million, $9.16 million, $9.53 million and $9.81 million.
EBITDA. Margins of 25, 26 and then 27 percent (A4) give EBITDA from the business itself of $2.06 million in year one rising to $2.65 million in year five. Savings from combining add $350,000 a year from year two (A5). Total EBITDA: $2.06 million, $2.62 million, $2.82 million, $2.92 million and $3.00 million.
Tax. Tax is 25 percent of EBITDA less $900,000 of depreciation (A8): $290,000 in year one, rising to $525,000 in year five.
Capital spending. Upkeep is $360,000 a year (A6), plus $900,000 of conversion work in year one (A7), for $1.26 million in year one and $360,000 thereafter.
Free cash flow. $0.51 million, $1.83 million, $1.98 million, $2.06 million and $2.11 million. Year one is thin because the conversion budget lands there.
Discounting
At 10.5 percent, the five years of free cash flow are worth $6.09 million today: $0.46 million, $1.50 million, $1.47 million, $1.38 million and $1.28 million.
For the years after the forecast, the model takes year five's free cash flow, grows it one year at 2.5 percent and divides by the gap between 10.5 and 2.5 percent: $2.11 million times 1.025, divided by 0.08, or $27.10 million. Discounted five years, it is worth $16.45 million today.
Total value to Tidewell: $6.09 million plus $16.45 million, or $22.54 million. The terminal value supplies 73 percent of that total, which means most of the value depends on Paddlemark's performance after year five, when the assumptions about margin and growth have settled.
Testing the Years Beyond Year Five
Since the terminal figure carries most of the answer, it deserves its own test. A perpetuity growing at 2.5 percent assumes Paddlemark's schools keep their buildings, keep their families and grow roughly with prices and local population forever. Swim schools are not a business that technology is likely to replace, and children keep needing lessons, so a modest growth rate is defensible. A rate above long-run inflation plus population growth would not be.
A second check converts the terminal value into a multiple. The $27.10 million terminal value is about nine times year five's EBITDA of $3.00 million. That is below the ten times Tidewell is paying today on trailing EBITDA, which is reasonable: a business five years further along, with growth slowing to 2.5 percent, should be worth a somewhat lower multiple than one still growing at five or six percent. If the implied exit multiple had come out at twelve or fourteen times, the growth or discount rate would need to be revisited. The same test will be rerun in Unit 8 whenever either input moves, so the terminal value never drifts away from what a buyer in year five might plausibly pay.
Cross-Checking the Price
The price can also be read as a multiple of the forecast. At $21.0 million, Tidewell pays about 8.0 times year two's EBITDA of $2.62 million, the first year that includes savings, and about 7.4 times year three's. Those figures look modest, but only because they include savings Tidewell itself will create. On Paddlemark's own year-three EBITDA without savings, about $2.47 million, the price is roughly 8.5 times. The multiples tell the same story as the cash flows: the price is fair if the savings arrive and generous if they do not.
Value Alone and Value With Savings
Setting the savings row (A5) to zero and rerunning the same model gives $19.75 million. That is what Paddlemark is worth as a business, run as it would be under Tidewell's ownership but without the savings from combining. The difference, $2.79 million, is the present value of the savings.
Paddlemark alone is worth $19.75 million, below the $21.0 million price, so Tidewell can justify the price only by counting on savings it will create itself, and the price hands $1.25 million of that savings value, 45 percent of it, to the seller.
What the Price Implies
At $21.0 million, Tidewell pays $1.25 million more than Paddlemark is worth on its own. It keeps the remaining $1.54 million of the savings value as gain for its owners. Research on acquisitions warns that buyers often pay away most or all of the savings they expect, leaving nothing for their own shareholders if those savings arrive late or small (Sirower, 1997). Here, Tidewell keeps a little more than half. That is a reasonable split, but it leaves a cushion of only $1.54 million between value and price, about 7 percent of the price.
Tracing Table
Every figure in the model traces to one row of the Unit 3 list. First-year revenue: A1. Growth: A2. Terminal growth: A3. Margin: A4, flagged in Unit 4. Savings: A5. Upkeep: A6. Conversion: A7, confirmed in Unit 4. Tax and depreciation: A8. Working capital: A9. Discount rate: A10. Price and financing: A11. No figure in the model comes from anywhere else.
Limits of the Model
The model values Paddlemark at Tidewell's cost of capital, not the seller's or a financial buyer's. It treats the savings as certain once they begin in year two; Unit 7 will test what happens if they fall short. It also assumes both building leases renew, which Unit 7 tests as a separate risk. Valuation texts stress that a model is a structured way of stating beliefs about the future, and its value lies as much in showing which beliefs matter as in the final number (Koller et al., 2020).
References
Kaplan, S. N., & Ruback, R. S. (1995). The valuation of cash flow forecasts: An empirical analysis. The Journal of Finance, 50(4), 1059-1093. https://doi.org/10.1111/j.1540-6261.1995.tb04050.x
Koller, T., Goedhart, M., & Wessels, D. (2020). Valuation: Measuring and managing the value of companies (7th ed.). Wiley.
Sirower, M. L. (1997). The synergy trap: How companies lose the acquisition game. Free Press.
The Purdue Global FI499 Unit 5 instructions
Unit 5 of FI499 asks you to build a valuation model of your capstone target. State the method and the discount rate, citing the assumption that sets it. Forecast revenue, EBITDA, tax and capital spending year by year, citing an assumption number for each driver, and derive free cash flow. Discount the forecast years and compute a terminal value, showing the arithmetic. Report what share of value the terminal value supplies, then test it by converting it into an implied exit multiple. Separate value on a stand-alone basis from value created by the buyer, and explain what the price means for who captures that value. Include a tracing table and the model's limits. Cite valuation texts and research on cash flow forecasts and acquisition pricing in APA 7.
How the FI 499 Unit 5 example is put together
The sample discounts at 10.5 percent and forecasts revenue of $8.23 million rising to $9.81 million, EBITDA of $2.06 million rising to $3.00 million including savings, tax on EBITDA less $900,000 of depreciation, and capital spending of $1.26 million in year one, then $360,000. Discounted flows total $6.09 million; a terminal value of $27.10 million adds $16.45 million, 73 percent of the total. An implied exit multiple of about nine times year-five EBITDA tests the terminal value. A cross-check reads the price as roughly 8.5 times year-three EBITDA without savings. The highlighted sentence explains who captures the savings, and a tracing table maps every figure to A1 through A11.
Where the points sit in the FI499 Unit 5 rubric
Valuation models in FI499 earn points for traceability, correct arithmetic and honest interpretation. Graders check that each driver cites its assumption, that free cash flow is derived correctly, that discounting and the terminal value are shown, and that the terminal value's share is reported and tested. The rubric rewards separating stand-alone value from value the buyer creates, explaining what the price implies for who keeps that value and stating the model's limits. Models that use inputs not on the assumption list, hide the terminal value's weight or present value with savings as if it described the target alone lose points. A tracing table makes auditing quick.
Common FI499 Unit 5 mistakes, and how to avoid them
Weak Unit 5 models present a value with no path back to the inputs, so a grader cannot check them. Others introduce numbers that appear nowhere on the assumption list. Many never report how much of value comes after year five, or never test whether the terminal growth implies a sensible exit multiple. Value including savings is presented as the target's worth, which overstates what the seller built. Limits are omitted. Should your capstone value a project or a whole company instead, the model can follow the same tracing discipline from assumption to answer. Every figure should be checkable in under a minute.
Get an FI499 Unit 5 example written to your instructions
Share the case file, the assumption set your section approved and the Unit 5 requirements, including any required method. Every driver in the model you receive links to your own assumption rows, stand-alone value is separated from synergy, and the gap to the price is stated. A workbook can come with it; a first sample is free, usually within 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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FI499 Unit 5 questions, answered
Why separate stand-alone value from synergy?
Because the seller created the first and the buyer creates the second. Paying up to stand-alone value is safe; every dollar above it is paid for savings the buyer has not yet delivered. The sample shows the price sits 1.25 million above stand-alone value, which turns the synergy estimate from a detail into one of the case's central risks.
Is 73 percent from the terminal value a problem?
Not by itself. Businesses with long lives and steady cash flows often carry most of their value beyond any five-year forecast. The problem arises when that share goes unreported, or when the growth rate behind it contradicts the assumption set. The sample reports the share beside the result and uses the 2.5 percent in A3, so a reader can judge it.
Where can I find a free FI499 Unit 5 sample paper?
This page holds a full FI499 Unit 5 valuation model of a composite six-school swim academy, with the forecast, discounting, terminal value tests, stand-alone and savings values and APA 7 references.
What does the terminal value's implied multiple show?
Whether the growth and discount rates produce a sensible exit price. The sample's terminal value is about nine times year-five EBITDA, a little below today's ten times, which fits a business whose growth has slowed to 2.5 percent.
Why is value without savings below the price?
Because Paddlemark on its own is worth $19.75 million. The extra $2.79 million comes from savings Tidewell would create after buying, so a $21.0 million price pays the seller for part of an improvement the buyer still has to deliver.