Discounted Cash Flow (DCF) Analysis Levered

Mercantile Bank Corporation (MBWM)

$31.67

+0.89 (+2.89%)

All numbers are in Millions, Currency in USD

Stock DCF: 144.08 | 31.67 | undervalue

Free Cash Flow

Year A/P	2017 Actual	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Projected	2023 Projected	2024 Projected	2025 Projected	2026 Projected
Revenue	128.75	139.09	151.49	167.42	179.22	194.69	211.49	229.73	249.56	271.09
Revenue (%)
Operating Cash Flow	38.66	61.74	44.77	37.88	64.57	63.32	68.78	74.72	81.17	88.17
Operating Cash Flow (%)
Capital Expenditure	-5.42	-6.32	-13.48	-8.99	-5.60	-10.18	-11.06	-12.02	-13.05	-14.18
Capital Expenditure (%)
Free Cash Flow	33.24	55.42	31.28	28.89	58.97	53.14	57.72	62.70	68.11	73.99

Weighted Average Cost Of Capital

Share price	$ 31.67
Beta	1.012
Diluted Shares Outstanding	15.70
Cost of Debt
Tax Rate	19.93
After-tax Cost of Debt	3.14%
Risk-Free Rate
Market Risk Premium
Cost of Equity	8.376
Total Debt	495.89
Total Equity	497.11
Total Capital	993
Debt Weighting	49.94
Equity Weighting	50.06
Wacc

Build Up Free Cash Flow

Year A/P	2017 Actual	2018 Actual	2019 Actual	2020 Actual	2021 Actual	2022 Projected	2023 Projected	2024 Projected	2025 Projected	2026 Projected
Revenue	128.75	139.09	151.49	167.42	179.22	194.69	211.49	229.73	249.56	271.09
Operating Cash Flow	38.66	61.74	44.77	37.88	64.57	63.32	68.78	74.72	81.17	88.17
Capital Expenditure	-5.42	-6.32	-13.48	-8.99	-5.60	-10.18	-11.06	-12.02	-13.05	-14.18
Free Cash Flow	33.24	55.42	31.28	28.89	58.97	53.14	57.72	62.70	68.11	73.99
WACC
PV LFCF						50.24	51.61	53.01	54.44	55.92
SUM PV LFCF										265.22

Terminal Value

Growth in perpetuity method:
Long-term growth rate
WACC (%)	5.76
Free cash flow (t + 1)	75.47
Terminal Value	2,007.22
Present Value of Terminal Value	1,517

Intrinsic Value

Enterprise Value	1,782.23
Net Debt	-479.27
Equity Value	2,261.50
Shares Outstanding	15.70
Equity Value Per Share	144.08