Download Sampa Video Solution - Harvard Case Solution PDF

TitleSampa Video Solution - Harvard Case Solution
TagsTypes School Work
File Size122.4 KB
Total Pages10
Document Text Contents
Page 2

2002E 2003E 2004E 2005E 2006E

Sales 1,200 2,400 3,900 5,600 7,500

EBITD
a 180 360 585 840 1,125

Depreciation (200) (225) (250) (275) (300)

EBIT (20) 135 335 565 825

Tax Expense 8 (54) (134) (226) (330)

EBIAT
a (12) 81 201 339 495

CAPX
b 300 300 300 300 300

Investment in Working Capital 0 0 0 0 0

Exhibit 2 Projections of Incremental Expected Sales and Cash Flows for Home Delivery

Project 2002-2006 (in thousands of dollars).

Source: Casewriter estimates.

a
EBITD is the Earnings Before Interest, Taxes and Depreciation. EBIAT is the Earnings Before Interest and After

Taxes. Taxes calculated assuming no interest expense.

b
Annual capital expenditures of $300,000 were in addition to the initial $1.5 million outlay, and are assumed to

remain constant in perpetuity.

Page 8

Growth rate 5% 5% 5%

Tax Rate 40% 40% 40%

Asset Beta 1.5 1.5 1.5

Debt Beta 0.25 0.25 0.25

Cost Of Debt* 6.80% 6.80% 6.80%

Risk Free Rate (Rf) 5% 5% 5%

Risk Premium 7.20% 7.20% 7.20%

Debt 25% 50% 75%

Equity 75% 50% 25%

Equity Beta 1.92 1.83 1.75

Cost Of Equity 18.80% 18.20% 17.60%

WACC 15.12% 11.14% 7.46%

Years 0 1 2

2002E 2003E

Initial Investment (1500)

Sales 1,200 2,400

EBITD
a 180 360

Depreciation (200) (225)

EBIT (20) 135

Tax Expense 8 (54)

EBIAT
a (12) 81

CAPX
b 300 300

Investment in Working

Capital

0 0

Free Cash Flow (112) 6

1.000 0.869 0.755

-1500.00 -97.290 4.53

1.000 0.900 0.810

-1500.00 -100.77 4.86

1.000 0.931 0.866

-1500.00 -104.225 5.20

25% Debt 50% Debt 75% Debt

NPV Case - 1 1469.97 3116.52 9379.56

NPV Case - 2 2040.53 4003.79 11471.49

NPV Case - 3 2687.67 5010.91 13847.90

Present Value

WACC - 25% DEBT/VALUE RATIO IN PERPETUITY

Discounting Factor WACC = 15.12%)

Discounting Factor WACC = 9.10%)

Discounting Factor (WACC = 4.40%)

Present Value

Present Value

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