Summary Financial Information FY 2000 in $ ’000s Sales 22500 EBITDA 2500 Depreciation 1100 Operating Profit 1400 Net Income 660 Terminal Value Growth 5.00% Initial outlay 1500 Additional Assumptions Risk free rate Proj. cost of debt Market Risk Premium Marginal Corporate Tax Rate Proj. Debt Beta Asset Beta for Kramer.com Expected Asset Return 5.00% 6.80% using CAPM 7.20% 40.00% 0.25 1.50 15.80% using CAPM Projections for Home Delivery Project 2002E 2003E 2004E 2005E 2006E Sales 1200 2400
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Introduction: Sampa Video‚ Inc. was a local video rental store which maintained a large share of the movie rental market in Boston Massachusetts in the 90’s. The firm was looking to increase their base from those who visited the store to online ordering and delivery within the Boston area. They looked to increase their ability to grow by more than double the usual yearly growth rate for a five year span. By opening up the online and delivery service they hoped to increase their sales by 10% yearly
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Sampa Video‚ Inc. 1. What is the appropriate discount rate and the value of the project assuming the firm is going to fund it with all equity? “The discount rate of a project should be the expected return on a financial asset of comparable risk” To estimate Sampa Video’s cost of equity capital we used the CAPM model‚ in which rf refers to the risk free rate‚ to the market risk premium‚ and β to the company Beta (Table 1). Since the Beta of the company wasn’t known‚ we decided to use an
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Sampa Video Valuation Case Study Free Cash Flow Projection: Based on all the given information and assumptions‚ the free cash flow projection for the company could be calculated as the table shown below (Exhibit 1‚ in thousands of $). The formula used for the calculation from year 2002 to 2006 is: FCF = (EBIT+Depr-Tax) + CAPX + Δ NWC. Starting at year 2007‚ the expected cash flow will be a growing perpetuity at an increasing rate of g=5%. Thus the terminal value could be calculated by the formula
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Analysis 1. If the firm was entirely financed‚ we can consider its competitors‚ Kramer.com and Cityretrieve.com‚ as comparables. Through the CAPM formula‚ we can calculate appropriate discount rate as follows. rU=5.0%+1.50*7.2%=15.8% The annual projected free cash flows which are presented in the Exhibit 1 are $-112‚000; $6‚000; $151‚000; $314‚000; $495‚000 respectively for year from 2002 to 2006. After year 2006‚ the free cash flow would grow at 5%‚ so we can calculate the terminal value of the
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Case 1: Sampa Video Case FBE 432 - J. K. Dietrich January 29th‚ 2013 Meghan Ammon Christina Daniele Sarah Riley To: Sampa Video Executive Committee From: Team C Consultants– Meghan Ammon‚ Christina Daniele‚ Sarah Riley Date: January 29‚ 2013 Subject: Sampa Video Home Delivery Expansion Analysis Introduction Sampa Video’s expansion into home delivery represents a tremendous business opportunity for the firm. However‚ before you make the initial investment this coming January‚ it
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Ice Cream Case Study Teaching Notes Video: Ben and Jerry’s Ice-cream Wars 1. What was Ben and Jerry’s ‘strategy’ in the video? 2. What stimulated the strategy? 3. Was it planned or emergent? 4. Was it successful? 5. How does this case help you think about ‘What is strategy?’ Were their decisions strategic? Yes‚ because: * Affected company as a whole * About scope and direction * Long-term Resource implications * Yes‚ they had to invest 5 pounds in a “correspondence
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In the video "A Place at the Table" it showcases eight American teens discussing their ancestors trials and tribulations of what they thought would be the American dream. Their names are Wislene‚ Peter‚ Samuel‚ Reina‚ Carol‚ David‚ Terry‚ and Deloria. Wislene is a descendent from Africa‚ her grandparents were stolen from their native land and forced into slavery in America. They were re-named and separated from each other. They had to endure social justice blatant racism and nightmares upon nightmares
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Video 0094-Subject: Science‚ the teacher did well at managing the time in his classroom. In the video there are two parts to how the class interacts; small groups leading into a whole class discussion. During the small groups‚ the teacher walks around the classroom observing and answering questions in each group. You can see the positive energy that he is displaying as he checks for understanding and cooperative working. The students are engaged and on task. I liked that he checked to see how the
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ECO204: Solutions to Homework 5 1. True‚ False‚ Uncertain a. False. Methods to eliminating moral hazard include writing efficient contracts between principals and agents‚ bonding and deferred payments. The methods to eliminate adverse selection include sending signals and relying on 3rd parties to verify quality. b. True. When there is asymmetric information‚ it drives out high-quality goods because consumers have a difficult time differentiating between high- and low-quality goods. As a result‚
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