For important details, please see the actual case exhibits

Exhibit 1
2007 2008
Number of stores 463 521
Income Statement Data
Sales 888 972
Cost of sales 588 641
G&A 156 188
Depreciation and amortization 14 18
Operating income (EBIT) 129 125
Balance Sheet Data
Cash and cash equivalents 48 26
Accounts receivable 6 3
Merchandise inventories 166 199
Accounts payable 16 22
Accrued expenses and other 36 43
Property and equipment (net) 85 112
Goodwill and other intangible assets 848 845
Long-term debt (incl. current portion) 820 679

Ownership as of end 2009

Shares %
Bain Capital Partners 42.2 58.0%
Rossy family 8.4 11.6%
Other company insiders 2.3 3.2%
Public 19.7 27.1%
Total 72.7 100.0%
exhibits

2009
564

1089
717
222
22
128

66
3
250
40
38
130
843
822 This is "fiscal year end" debt. For all calculations in
this assignment, do not use this number but use
the amount of debt for Dollarama that is given in
exhibit 4 for the actual (December) end debt.
culations in
r but use
given in
debt.
For important details, please see the actual case exhibits
Exbibit 2
CompanyCorporate/Franchise
Dollarama Corporate
Your Dollar Store With More Franchise/Corporate
Great Canadian Dollar Store Franchise
Buck or Two Franchise
Everything For A Dollar Franchise
Dollar Giant Corporate
Dollar Blitz Franchise
The $1 Store Plus & Only Deals Franchise
xhibits
it 2
Stores Store Size Range Price Point
594 2,500–10,000 $1–$2
135 8,000–15,000 Up to $2
104 2,000–10,000 Up to $15
79 Up to 6,000 $1, $1.50, $2
70 1,600–8,000 $1
65 8,000–15,000 $1.25
40 NA $1
20 2,000–3,000 $1–$3
For important details, please see the actual case exhibits
Exhibit 3
Dollorama Dollar Tree 99 Cents
Total stores 594 3,591 279
Average store size 9,700 10,654 21,125
Price point range $1 - $2 $1 or less $0.99
SKU count 4,400 5,000
Offshore sourcing 52% 43%
Private label 52% 10%
Consumables mix 37% 49% 56%
Sales/selling sq. ft. 251 158 273
EBIT margin 11.8% 7.9% 1.8%
Inv./gross sq. ft. 44 18 25
Inventory days 112 93 76
 e exhibits
Exhibit 3
Family Dollar Freds Big Lots Dollar General
6,655 639 1,339 8,362
8,325 18,400 29,789 7,017
$10 or less Multi Multi $10 or less
12,000 20,000 10,500
46% 27% 50%
19% 7% 21%
64% 47% 30% 69%
153 184 160 180
6.2% 1.5% 5.5% 5.6%
19 27 19 26
76 101 124 71
For important details, please see the actual case exhibits
Exhibit 4
Market Cap Debt
Dollarama (C$) 1,675 475
U.S. Dollar Stores/Discount/Of
99 Cents Only Stores (US$) 845 0.6
Big Lots (US$) 2,377 1.0
Dollar General (US$) 7,949 4,138
Dollar Tree (US$) 4,317 272
Family Dollar Stores (US$) 3,914 250
Fred's (US$) 367 5
General Merchandise R
Shoppers Drug Mart (C$) 9,648 1,463
Canadian Tire (C$) 4,420 1,570
Costco (US$) 25,863 2,303
Target Corp (US$) 35,306 17,556
TJX (US$) 15,693 994
Wal-Mart (US$) 208,226 47,353
 se exhibits
Exhibit 4
Cash & Invent. Revenue EBITDA Gross Margin
34 1,204 158 34%
ores/Discount/Off-Price Retailers
128 1,337 91 40%
46 4,630 348 40%
517 11,127 1,086 30%
342 5,059 619 35%
445 7,401 617 35%
39 1,784 65 28%
al Merchandise Retailers
59 9,994 1,149 12%
1,067 10,614 893 11%
3,727 71,422 2,565 13%
919 64,736 6,169 29%
1,524 19,727 2,173 25%
6,003 404,543 30,361 25%
 This is the amount of debt that you should use
Beta for Dollarama in any calculations in this
assignment

0.45
1.11

0.52
0.34
0.85

0.42
0.58
0.78
1.12
0.62
0.24
ou should use
in this
For important details, please see the actual case exhibits
Exhibit 5
Shoppers and CanTire
Size Price
Dove beauty bar 2x120g $ 4.99
50W halogen 1 $ 5.99
Axe/Max body wash 354ml $ 7.49
Reading glasses 1 $ 14.99
AAA batteries 4 $ 7.99
Tongue and groove pliers 6.5" $ 17.99
Muesli 350g $ 6.49
Biodegradable kitchen sacks 20 $ 4.99
Wineglass 4 $ 8.99
Total
al case exhibits
Exhibit 5
ers and CanTire Dollorama Savings
Size Adj. Price Size Price $ %
$ 2.08 100g $ 1.00 $ 1.07 52%
$ 5.99 1 $ 1.00 $ 4.99 83%
$ 7.41 350ml $ 1.00 $ 6.41 86%
$ 14.99 1 $ 1.00 $ 13.99 93%
$ 7.99 4 $ 1.00 $ 6.99 87%
$ 17.99 9.5” $ 2.00 $ 15.99 89%
$ 3.71 200g $ 1.25 $ 2.46 66%
$ 2.50 10 $ 1.00 $ 1.50 60%
$ 2.25 1 $ 1.00 $ 1.25 56%
$ 64.90 $ 10.25 $ 54.65 84%
For important details, please see the actual case exhibits
Exhibit 10
growth (GDP, real) Inflation Minimum Wage
1990 1.8% 5.0% 4.0%
1991 1.5% 3.8% 7.9%
1992 2.5% 2.1% 3.3%
1993 4.4% 1.7% 1.2%
1994 6.9% 0.2% 1.5%
1995 3.6% 1.8% 2.7%
1996 4.5% 2.2% 3.1%
1997 5.0% 0.8% 1.6%
1998 3.4% 1.0% 1.5%
1999 9.2% 2.6% 1.8%
2000 8.7% 3.2% 1.3%
2001 -0.4% 0.7% 1.6%
2002 7.8% 3.9% 2.4%
2003 3.8% 2.0% 2.7%
2004 7.4% 2.1% 1.7%
2005 7.2% 2.2% 4.1%
2006 3.2% 1.6% 4.6%
2007 6.9% 2.4% 5.0%
2008 0.7% 1.2% 5.3%
2009 -2.9% 1.2% 5.5%
ase exhibits
Exhibit 10
C$ / US$ Oil Price Commod. Ret. Ind. TSX Ret. Ind.
1.2 28.44 5.1% -14.8%
1.2 19.15 -4.4% 12.0%
1.3 19.49 6.5% -1.4%
1.3 14.19 10.3% 32.5%
1.4 17.77 16.9% -0.2%
1.4 19.54 6.0% 14.5%
1.4 25.90 12.6% 28.3%
1.4 17.65 8.8% 15.0%
1.5 12.14 -15.0% -1.6%
1.5 25.76 -3.5% 31.7%
1.5 26.72 18.4% 7.4%
1.6 19.96 -12.0% -12.6%
1.6 31.21 17.0% -12.4%
1.3 32.51 -8.2% 26.7%
1.2 43.36 4.3% 14.5%
1.2 61.06 14.8% 24.1%
1.2 60.85 -2.6% 17.3%
1.0 95.95 4.5% 9.8%
1.2 39.25 -20.7% -33.0%
1.1 75.41 4.9% 33.4%
For important details, please see the actual case exhibits
Exhibit 11
Maturity YTM %
3 months 0.13
6 months 0.25
1 year 0.53
2 years 1.22
3 years 1.68
5 years 2.49
10 years 3.34
15 years 3.84
20 years 4.08
30 years 3.98
case exhibits
 Additional Data for Dollarama
2009 2010 2011 2012
Current Borrowing Cost 5.5%
Market Risk Premium 5%
Tax Rate 40%
Sales growth rate 10% 7.5% 5%
CAPX 40 35 30
Depreciation 20 25 30
EBIT Margin Decline 0.5% 0.5% 0.5%
NWC growth 12% 10% 7%

Use this for the APV Question only!

Debt paydown 200 200 75
rama This is the rate at which Dollarama can go
Thereafter … out and raise debt in 2009 Assume
comparable firms can also borrow at this
rate.

2.5%
Each year, the EBIT Margin declines by th
CAPX = Deprec. amount, so if it started (for example) at 15
and the decline is (for example) 0.5%, the
constant
falls to 14.5%
2.5%

ion only!
eliminated
NWC level will grow with at the same rate a
sales in the long run
ch Dollarama can go
2009 Assume
also borrow at this

Margin declines by this

d (for example) at 15%,
example) 0.5%, then it

ith at the same rate as

 beta (E) E D beta (U)
Shoppers 0.42 9,648.00 1,463.00 0.36
CanTire 0.58 4,420.00 1,570.00 0.43
Avg 0.40

D 475.00 0.22
E 1,675.00
beta (E) 0.51
rf 3.98%
MRP 5.00%
rE 6.52%
rD 5.50%
t 40.00%
WACC 5.81%
 2009 2010 2011
Sales 1,089.00 1,197.90 1,287.74
EBIT Margin 11.75% 11.25% 10.75%
NWC Level 241.00 269.92 296.91

EBIT×(1-t) 80.89 83.09

Depreciation 20.00 25.00
CAPX 40.00 35.00
NWC Inv. 28.92 26.99
FCF 31.97 46.10
TV
PV (2010-2012) 124.06
PV(TV) 1,971.07
V 2,095.13
D 475.00
E 1,620.13

Rossy Stake 188.03

 2012 2013
1,352.13 1,385.93
10.25% 10.25%
317.70 325.64

83.19 85.27
30.00 30.75
30.00 30.75
20.78 7.94
62.40 77.32
2,335.07
 rU 5.96%

2009 2010
FCF 31.97

D 475.00 275.00
D*rD*t 8.25

Operations
PV (2010-2012) 123.68
PV(TV) 1,877.52

DTS
PV (2010-2012) 11.98

Firm
V 2,013.18
D 475.00
E 1,538.18

Rossy Stake 178.52

2011 2012 2013
46.10 62.40 77.32
TV 2,233.73

75.00 - -
3.85 0.83 -
 E D Sales
Dollarama 1,675.00 475.00 1,204.00
Dollar General 7,949.00 4,138.00 11,127.00
Dollar Tree 4,317.00 272.00 5,059.00
Family Dollar 3,914.00 250.00 7,401.00
 Implied
EBIT Earnings EV / Dollarama
EBITDA Margin EBIT (est) Sales V
158.00 128 61.13 1,092.14
1,086.00 5.60% 623.11 237.31 1.09
619.00 7.90% 399.66 230.82 0.91
617.00 6.20% 458.86 267.07 0.56
Median 0.91
 Implied Implied Implied
Dollarama EV / Dollarama Dollarama
E EBITDA V E P/E
617.14 1,171.34 696.34
11.13 33.50
7.41 18.70
6.75 14.66
Median 7.41 Median 18.70
 Implied
Dollarama
E
1,143.21
Question
5a

Question
5b
They are not diversified - so using the CAPM will "under estimat
since they will surely also care about unsystematic risk.

There are mostly intangible assets and the firm only leases their
there is no good collateral and banks will be reluctant to lend sin
losses in financial distress can be substantial.