Question 1

Date
7-Oct-04
6-Oct-04
5-Oct-04
4-Oct-04
1-Oct-04
30-Sep-04
29-Sep-04
28-Sep-04

3.98
4.26
3.34
3.24
3.23
3.14
2.88
2.74

4.16
4.29
3.35
3.31
3.35
3.22
3.02
2.77

Question 2
Weighted average common shares outstanding (basic and
diluted)
NPV

Question 3
Entertainment industry cost of capital

Question 4 Capital cash flows

5-year

nper
PMT

5
$417,682,497.44

10-year

nper
PMT

10
$248,067,871.98

15-year

nper
PMT

15
$194,158,312.20

Question 5
There is no historical price data for XM Radio, because Sirius Radio and XM Radio had merged.

Adj.Close
3.91
3.67
3.28
3.21
3.12
3.12
2.86
2.6

1,238,585,000
$

1,672,089,750.00

7.90%

Sirius Radio and XM Radio had merged.

18.67
18.06
15.63
15.12
14.65
14.93
14.09
12.37

4
3.87
3.35
3.24
3.14
3.2
3.02
2.65

206,666,500
343,630,900
72,087,700
64,923,100
69,406,300
94,501,100
105,622,600
39,418,900

Question 1 Financial statements

Source: www

Income Statement (All numbers in thousands)

Revenue
Total Revenue
Cost of Revenue
Gross Profit
Operating Expenses
Research Development
Selling General and Administrative
Non Recurring
Others
Total Operating Expenses
Operating Income or Loss
Income from Continuing Operations
Total Other Income/Expenses Net
Earnings Before Interest and Taxes
Interest Expense
Income Before Tax
Income Tax Expense
Minority Interest
Net Income From Continuing Ops
Non-recurring Events
Discontinued Operations
Extraordinary Items
Effect Of Accounting Changes
Other Items
Net Income
Net Income
Preferred Stock And Other Adjustments
Net Income Applicable To Common Shares

12/31/2015
24,704,000
9,713,000
14,991,000
3,167,000
8,533,000
450,000
2,841,000
205,000
3,046,000
164,000
2,882,000
710,000
1,579,000
1,990,000
1,990,000
1,990,000

Cash Flow (All numbers in thousands)

Period Ending
Net Income
Operating Activities, Cash Flows Provided By or Used In
Depreciation
Adjustments To Net Income
Changes In Accounts Receivables
Changes In Liabilities
Changes In Inventories

12/31/2015
1,990,000
1,907,000
1,012,000
-385,000
169,000
196,000

Changes In Other Operating Activities

Total Cash Flow From Operating Activities
Investing Activities, Cash Flows Provided By or Used In
Capital Expenditures
Investments
Other Cash flows from Investing Activities
Total Cash Flows From Investing Activities
Financing Activities, Cash Flows Provided By or Used In
Dividends Paid
Sale Purchase of Stock
Net Borrowings
Other Cash Flows from Financing Activities
Total Cash Flows From Financing Activities
Effect Of Exchange Rate Changes
Change In Cash and Cash Equivalents

-47,000
5,386,000
-902,000
-24,000
-1,828,000
-2,754,000
-907,000
-2,735,000
1,295,000
-2,292,000
-134,000
206,000

Balance Sheet (All numbers in thousands)

Period Ending
Current Assets
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Inventory
Other Current Assets
Total Current Assets
Long Term Investments
Property Plant and Equipment
Goodwill
Intangible Assets
Accumulated Amortization
Other Assets
Deferred Long Term Asset Charges
Total Assets
Current Liabilities
Accounts Payable
Short/Current Long Term Debt
Other Current Liabilities
Total Current Liabilities
Long Term Debt
Other Liabilities
Deferred Long Term Liability Charges
Minority Interest
Negative Goodwill

12/31/2015
6,549,000
2,726,000
3,977,000
1,245,000
566,000
15,063,000
5,508,000
3,850,000
17,090,000
2,149,000
1,788,000
1,164,000
46,612,000
5,376,000
1,299,000
6,210,000
12,885,000
5,475,000
941,000
4,592,000
1,579,000
-

Total Liabilities
Stockholders' Equity
Misc. Stocks Options Warrants
Redeemable Preferred Stock
Preferred Stock
Common Stock
Retained Earnings
Treasury Stock
Capital Surplus

25,472,000

19,000
21,700,000
-579,000
21,140,000
1,901,000

Question 2 Free Cash Flow

Source: www.finance.yahoo.com

Dell computer capital budgeting division

12/31/2014
24,440,000
9,191,000
15,249,000

12/31/2013
23,222,000
8,749,000
14,473,000

2,991,000
7,982,000
239,000

2,761,000
7,338,000
224,000

4,037,000

4,150,000

-128,000
3,909,000
147,000
3,762,000
868,000
1,629,000
2,714,000

-129,000
4,021,000
156,000
3,865,000
772,000
1,485,000
2,889,000

Question 3 NPV and IRR

-

2,714,000

2,889,000
-

2,714,000

2,889,000

Question 4 Sensitivity analysis

12/31/2014
2,714,000

12/31/2013
2,889,000

1,864,000
921,000
309,000
1,363,000
149,000

1,665,000
958,000
377,000
1,955,000
408,000

-345,000
6,523,000

-269,000
6,923,000

-979,000
1,348,000
-2,920,000
-2,551,000

-943,000
-3,209,000
-1,608,000
-5,760,000

-879,000
-2,995,000
-1,665,000

-415,000
-3,039,000
5,414,000

-5,437,000
-83,000
-1,548,000

2,076,000
-62,000
3,177,000

12/31/2014

12/31/2013

6,343,000
1,978,000
4,413,000
1,276,000
653,000
14,663,000
6,334,000
3,766,000
16,134,000
2,125,000

7,891,000
2,773,000
4,773,000
1,334,000
507,000
17,278,000
6,924,000
3,478,000
14,424,000
1,780,000

1,611,000
952,000
45,585,000

1,965,000
952,000
45,849,000

5,689,000
1,299,000
6,021,000
11,710,000
5,469,000
737,000
4,144,000
1,629,000

4,856,000
1,665,000
5,278,000
11,799,000
5,494,000
648,000
4,122,000
1,485,000
-

23,689,000

23,548,000

20,000
22,242,000

20,000
21,114,000
-

-366,000
21,896,000
3,637,000

1,406,000
-239,000
22,301,000
6,097,000

Question 2 Free Cash Flow

Dell computer capital budgeting division
Property, plant equipemtn at the end of 2013
The life of the product (in years)
Total revenue for the fiscal year of 2013
EBITDA/Sales profit margin
Depreciation rate (SL over 5-year life)
Dell's tax rate
NWC/Sales
First year's revenue rate

Year
Initial investment
Additional investment
Revenue
Costs
Depreciation
NWC
Free cash flow

0
(347,800,000)

(347,800,000.00)

12%
120,048,618.90

Question 3 NPV and IRR

Cost of capital
NPV (using excel formula)
Discount factor
PV of cash flows
NPV
IRR

(347,800,000)
120,048,618.90
24%

Question 4 Sensitivity analysis

Parameter
First year sales / Dell's revenue
Cost of capital
Revenue growth after first year

Initial assumption
3%
12%
15%, 10%, 5%, 5%

First year sales / Dell's revenue

NPV
2% $
3% $
4% $

(63,020,818.19)
120,048,618.90
303,118,056.00

Cost of capital
15% $
12% $
10% $

83,603,625.80
120,048,618.90
147,000,519.11

0% $
15%, 10%, 5%, 5% $
10% $

29,412,653.88
120,048,618.90
113,712,485.33

Revenue growth after first year

In this situation we can see that NPV value of this project is very sensitive to the changes in value of total
indicates that revenue of the project is the most important parameter.

3,478,000,000
5
23,222,000,000
24.49%
20%
19.97%
5.39%
3%

(34,780,000)
696,660,000
526,080,000
69,560,000
37,530,000
78,092,137.13 $

(36,519,000)
801,159,000
604,992,000
69,560,000
43,159,500
128,729,857.31 $

0.8929
69,725,122

0.7972
102,622,654

Worst case

Best case
2%
15%
0%

4%
10%
10%

3
(36,884,190)
881,274,900
665,491,200
69,560,000
47,475,450
145,376,652.78

0.7118
103,476,230

ery sensitive to the changes in value of total revenue, which

rameter.

(37,253,032)
925,338,645
698,765,760
69,560,000
49,849,223
155,584,127.89 $

0.6355
98,876,526

5
(37,625,562)
971,605,577
733,704,048
69,560,000
52,341,684
164,158,755.43

0.5674
93,148,086