3192 Words13 Pages

Case Study Tottenham Hotspur
Question 1 a] DCF Analysis A discounted cash flow analysis is a method of valuing a project, company or asset using the concepts of the time value of money. All future cash flows are estimated and discounted with an appropriate discount rate, to give their present values (PV’s). The sum of all future cash flows, both incoming and outgoing, is the net present value (NPV), which is taken as the value or price of the cash flows in question. To perform a DCF analysis we have made a set of assumptions. The assumptions are listed below:
Capital expenditure is £3.3m in 2007 and grows and 4% per year after 2009 Depreciation is £2.2m and grows at 4% per year after 2009 Risk free rate (rf) is 4.57% Tottenham’s equity beta is 1.29 The tax rate is 35% The market premium is 4% (based on a mature market, as shown in the slides) Tottenham’s debt rate 5.25%% [2.26/43.08] We assume the default rate of Tottenham is 0 (zero) The company’s long term growth rate is 4% The cost of equity (Re) is 9.73% (4.57% + 1.29 * 4%) The cost of debt is 3.41% [5.25% * (1 - 0.35)] The appropriate WACC is 8.14% [9.73% * (128.2/(128.2 + 43.08)) + 3.41 * (43.08/(128.2 + 43.08))] We assumed the items property plant equipment, intangible assets, accounts receivable, inventory, investments and cash as a percentage of revenues. The items accounts payable and long term debt are used as a percentage of operating costs An important assumption is that NWC is being managed efficiently immediately, reducing the change in NWC to zero
Table 1-4 show the process of valuing the company through the DCF method. The ultimate value can be found in table 4. The forecasted P&L is shown below:
Revenue Evolution 2007-2020 (£m)
Attendance Sponsorship Broadcast Merchandise
250 200 150 100 50 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

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