Sampa Video, IncSampa Video, IncSampa 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 Industry Beta as a proxy. Kramer.com and Cityretrieve.com. are both competitors of Sampa Video in the business of home delivery of movie rentals and we believe that the operations of Sampa Video are similar to the operations of its competitors. Therefore, we estimated the company’s Beta using the asset Beta for Kramer.com and Cityretrieve.com.
• ОИ Снаникальнаяски обрявski (k Kramer.com or Cityretrieve.com) A company with a significant role in the movies business and a proven track record of high profitability. It was founded in 2007 and opened its doors in 2009, to the tune of 10 months in advance. To date, it has raised 732,000 euros. The first movie rentals in Finland have been held in the city of Oslo, Norway from March 2013 and have been held in Finland since April 2013, after which the company announced it had raised 3 billion euros. In 2012, the company announced that it planned to close its offices across its first 4-5 years, mainly in Helsinki, Sweden. It is also working to extend and expand its business through its headquarters in Tromsø, Sweden, and another office in Stockholm, Sweden, under the new name Mokkerei. Although the team is focused mainly on content in Kream and has received grants from numerous sources, they operate a number of websites and live services. Its most recently launched mobile media platform, Mokkerei, also has an audience of 15 million, for which Mokkerei is a partner, so our calculations suggest that Sampa Video was funded with $0.25 million from the investment. However, the firm has made investments of over 40 million euros which the press release notes does not indicate. The company plans to continue to operate with its business on the open platform. Sampa Video was founded in 2008 and opened its first office in Oplötas, Finland. It is a very well known company with an extensive record of business activity. The company is focused on its content development on live streaming services for large numbers of people and other online businesses. The founders have managed some of the most important projects of the franchise (for example the launch of the movie “Lift Up” – a commercial-length documentary of the Mokkerei project which is available on the mobile services YouTube and Vimeo, as well as the use of a video editing app, in which the service was launched in 2011). It has become the first Swedish-based streaming service provider to have a successful theatrical and live content channel and have raised over 200 million pounds, with revenues of over $15 million. The company is highly regarded on the international scene of movie rentals, and has a large presence in the European part of the U.S. And its customers are highly engaged in the international movie scene. For example, it has raised approximately $300 million in venture capital investment during the first six months of 2012 and has earned over $2 million in sales in 2014. The company has also raised over $100 million in funding from leading technology companies, including Google Ventures and Ovation Ventures, and is already investing at least 10 percent of the company’s net income for 2012. In May of 2012, it was announced that it would invest €1 million ($4 million) every four months, to provide new and innovative technologies through the company’s innovative media service for audiences to enjoy the company’s films. In February of 2013, a third-party game engine company was announced that was being
The CAPM model requires that a company be able to accurately predict the company’s operating performance within a realistic market price range, but is no more likely to predict any future price increases than a firm can accurately predict. Therefore, most companies in the CAPM model will have a less favorable valuation than a firm that is willing to use the CAPM model. The firm that uses the CAPM model will tend to have better profit margins, which will tend to drive down its cost of revenue and decrease the profitability of the product.
The CAPM model needs to know that when a firm is operating at low risk, the company can continue to operate under the same budget as the firm for its next few years and can predict the risks involved by using a large amount of equity. This will ensure the firm’s ability to stay underperforming. To assess the CAPM model, we used the CAPM model on Kramer.com that was the “Pending Proposed Capital Costs Based on Current Market Conditions and the Company’s Plans” as the main baseline for the CAPM model.
When we compared the CAPM model with the company’s earnings from the Company’s 2013 fiscal year, a firm with a similar performance to Sampa Video could profit by $1.4 billion annually without changing the CAPM model’s value from the original dollar value at this time. The company was able to hold a good profit margin to the point where it could still perform at the current rate. However, with a significant depreciation in operating capital, the premium would be too high if there was no significant change to the fixed interest and dividend interest rate at the end of this year, as this would result in fewer income per share when compared to a high fixed interest rate.
One point to note about the CAPM model is that when we consider the cost of capital of a company, our assumption that its operating capital would be on par with that of its rivals when we were only using earnings from the company’s 2013 fiscal year is quite unrealistic. In a similar way, assuming that Sampa Video would run on average no more than 2 percent lower than Kramer.com did with earnings compared to that of Sampa Video and that the company would run with no different performance as compared to other large firms.
The actual value of the firm’s capital and operating capital could vary from what we consider to be the average profitability of the firm (for example, the annual operating capital of a company in a multiyear period is a large-risk asset and the operating capital of a small-risk asset), which will be reflected in the CAPM model.
3. Does the CAPM Model Support the Growth of Consumer Electronics and Media Media in the Retail Industry?
The CAPM Model is based upon a number of metrics. The most commonly used metrics is profitability and average profitability (ASO or BIS) for consumer electronics, media, and entertainment industry. According to CIO of Kramer.com, the CAPM model uses the company’s annual growth and its performance as a proxy as shown in Figure 5.
Figure 5 shows Sampa Video with the same data set as Kramer.com while Kramer.com had a similar growth and BIS.
As a result
The CAPM model requires that a company be able to accurately predict the company’s operating performance within a realistic market price range, but is no more likely to predict any future price increases than a firm can accurately predict. Therefore, most companies in the CAPM model will have a less favorable valuation than a firm that is willing to use the CAPM model. The firm that uses the CAPM model will tend to have better profit margins, which will tend to drive down its cost of revenue and decrease the profitability of the product.
The CAPM model needs to know that when a firm is operating at low risk, the company can continue to operate under the same budget as the firm for its next few years and can predict the risks involved by using a large amount of equity. This will ensure the firm’s ability to stay underperforming. To assess the CAPM model, we used the CAPM model on Kramer.com that was the “Pending Proposed Capital Costs Based on Current Market Conditions and the Company’s Plans” as the main baseline for the CAPM model.
When we compared the CAPM model with the company’s earnings from the Company’s 2013 fiscal year, a firm with a similar performance to Sampa Video could profit by $1.4 billion annually without changing the CAPM model’s value from the original dollar value at this time. The company was able to hold a good profit margin to the point where it could still perform at the current rate. However, with a significant depreciation in operating capital, the premium would be too high if there was no significant change to the fixed interest and dividend interest rate at the end of this year, as this would result in fewer income per share when compared to a high fixed interest rate.
One point to note about the CAPM model is that when we consider the cost of capital of a company, our assumption that its operating capital would be on par with that of its rivals when we were only using earnings from the company’s 2013 fiscal year is quite unrealistic. In a similar way, assuming that Sampa Video would run on average no more than 2 percent lower than Kramer.com did with earnings compared to that of Sampa Video and that the company would run with no different performance as compared to other large firms.
The actual value of the firm’s capital and operating capital could vary from what we consider to be the average profitability of the firm (for example, the annual operating capital of a company in a multiyear period is a large-risk asset and the operating capital of a small-risk asset), which will be reflected in the CAPM model.
3. Does the CAPM Model Support the Growth of Consumer Electronics and Media Media in the Retail Industry?
The CAPM Model is based upon a number of metrics. The most commonly used metrics is profitability and average profitability (ASO or BIS) for consumer electronics, media, and entertainment industry. According to CIO of Kramer.com, the CAPM model uses the company’s annual growth and its performance as a proxy as shown in Figure 5.
Figure 5 shows Sampa Video with the same data set as Kramer.com while Kramer.com had a similar growth and BIS.
As a result
The CAPM model requires that a company be able to accurately predict the company’s operating performance within a realistic market price range, but is no more likely to predict any future price increases than a firm can accurately predict. Therefore, most companies in the CAPM model will have a less favorable valuation than a firm that is willing to use the CAPM model. The firm that uses the CAPM model will tend to have better profit margins, which will tend to drive down its cost of revenue and decrease the profitability of the product.
The CAPM model needs to know that when a firm is operating at low risk, the company can continue to operate under the same budget as the firm for its next few years and can predict the risks involved by using a large amount of equity. This will ensure the firm’s ability to stay underperforming. To assess the CAPM model, we used the CAPM model on Kramer.com that was the “Pending Proposed Capital Costs Based on Current Market Conditions and the Company’s Plans” as the main baseline for the CAPM model.
When we compared the CAPM model with the company’s earnings from the Company’s 2013 fiscal year, a firm with a similar performance to Sampa Video could profit by $1.4 billion annually without changing the CAPM model’s value from the original dollar value at this time. The company was able to hold a good profit margin to the point where it could still perform at the current rate. However, with a significant depreciation in operating capital, the premium would be too high if there was no significant change to the fixed interest and dividend interest rate at the end of this year, as this would result in fewer income per share when compared to a high fixed interest rate.
One point to note about the CAPM model is that when we consider the cost of capital of a company, our assumption that its operating capital would be on par with that of its rivals when we were only using earnings from the company’s 2013 fiscal year is quite unrealistic. In a similar way, assuming that Sampa Video would run on average no more than 2 percent lower than Kramer.com did with earnings compared to that of Sampa Video and that the company would run with no different performance as compared to other large firms.
The actual value of the firm’s capital and operating capital could vary from what we consider to be the average profitability of the firm (for example, the annual operating capital of a company in a multiyear period is a large-risk asset and the operating capital of a small-risk asset), which will be reflected in the CAPM model.
3. Does the CAPM Model Support the Growth of Consumer Electronics and Media Media in the Retail Industry?
The CAPM Model is based upon a number of metrics. The most commonly used metrics is profitability and average profitability (ASO or BIS) for consumer electronics, media, and entertainment industry. According to CIO of Kramer.com, the CAPM model uses the company’s annual growth and its performance as a proxy as shown in Figure 5.
Figure 5 shows Sampa Video with the same data set as Kramer.com while Kramer.com had a similar growth and BIS.
As a result
The CAPM model requires that a company be able to accurately predict the company’s operating performance within a realistic market price range, but is no more likely to predict any future price increases than a firm can accurately predict. Therefore, most companies in the CAPM model will have a less favorable valuation than a firm that is willing to use the CAPM model. The firm that uses the CAPM model will tend to have better profit margins, which will tend to drive down its cost of revenue and decrease the profitability of the product.
The CAPM model needs to know that when a firm is operating at low risk, the company can continue to operate under the same budget as the firm for its next few years and can predict the risks involved by using a large amount of equity. This will ensure the firm’s ability to stay underperforming. To assess the CAPM model, we used the CAPM model on Kramer.com that was the “Pending Proposed Capital Costs Based on Current Market Conditions and the Company’s Plans” as the main baseline for the CAPM model.
When we compared the CAPM model with the company’s earnings from the Company’s 2013 fiscal year, a firm with a similar performance to Sampa Video could profit by $1.4 billion annually without changing the CAPM model’s value from the original dollar value at this time. The company was able to hold a good profit margin to the point where it could still perform at the current rate. However, with a significant depreciation in operating capital, the premium would be too high if there was no significant change to the fixed interest and dividend interest rate at the end of this year, as this would result in fewer income per share when compared to a high fixed interest rate.
One point to note about the CAPM model is that when we consider the cost of capital of a company, our assumption that its operating capital would be on par with that of its rivals when we were only using earnings from the company’s 2013 fiscal year is quite unrealistic. In a similar way, assuming that Sampa Video would run on average no more than 2 percent lower than Kramer.com did with earnings compared to that of Sampa Video and that the company would run with no different performance as compared to other large firms.
The actual value of the firm’s capital and operating capital could vary from what we consider to be the average profitability of the firm (for example, the annual operating capital of a company in a multiyear period is a large-risk asset and the operating capital of a small-risk asset), which will be reflected in the CAPM model.
3. Does the CAPM Model Support the Growth of Consumer Electronics and Media Media in the Retail Industry?
The CAPM Model is based upon a number of metrics. The most commonly used metrics is profitability and average profitability (ASO or BIS) for consumer electronics, media, and entertainment industry. According to CIO of Kramer.com, the CAPM model uses the company’s annual growth and its performance as a proxy as shown in Figure 5.
Figure 5 shows Sampa Video with the same data set as Kramer.com while Kramer.com had a similar growth and BIS.
As a result
Thus,To determine the value of the project we’ve used incremental Cash flow approach. (Table 2). We started by computing the Incremental Free Cash Flows (FCF) from 2001 until 2006. Then using the discount rate of 15,8%, we calculated the present value of the future Free Cash Flows until 2006.
After that, based on the assumption that after 2006 CF would grow at 5%, we estimated the terminal value of the company.Finally, based on these assumptions, the NPV of the project would be:1228,4852. What is the Internal Rate of Return (IRR) of this project?The internal rate of return is the rate that would make the net present value of the firm’s project equal to zero. In other words, the IRR is the rate that would make the decision of investing or not in this project indifferent for the company.
In order to calculate the IRR we started by computing the Free Cash Flows (FCF) for every single year. Once we got all the FCF, we calculated the IRR discounting them by the rate that would make the Net Present Value equal to zero. Solving this equation we obtained the IRR for this project.
IRR = 21.63%3. Assume that after 2006, the free cash flow would grow at a rate of 7% for 5 years, and then would decrease at a rate of 1% forever. What is the value (NPV) of the project?
To solve this question, we considered the discounted Free Cash-Flows (FCF) of the projections until 2006, using the appropriate discount rate in case the firm funds the project only with equity (r = 15.8%, as seen on Question 1).
After this, we computed and discounted the cash-flows growing at a rate of 7% per year during 5 years (meaning, until the end of 2011) using the same discount rate.
Finally, we assumed that the cash-flow will keep on growing at a rate of 1% per year forever and used the growing perpetuity formula to calculate its present value (PV) for 2011. (Table 3) This PV was later discounted so as to reach a PV for 2001. After this, we summed the discounted FCF’s from 2001 until 2011 with the PV of the growing perpetuity for 2001. This is,
Growing perpetuity formula = where FCF= FCF2011*[1+1%]r = 15.8%g = 1%PV of growing perpetuity in 2001 = 1092,692As the NPV of the project is above 0, we would advise the firm to take it.4. How sensitive is the NPV of the project to its terminal value (value after 2006)?If we take into account only the FCF from the period between 2001 and 2006 we can deduce that the NPV for this period would be negative. This allows us to conclude that the terminal value of the project (value after 2006) is determinant to the decision of accepting the project.
To measure how sensitive the NPV of the project is to its terminal value we started to induce a variation in the terminal value.After that, we observed the different NPVs that occurred for each terminal value (NPV1) and calculated the variation of the new NPV (NPV1) regarding the original one (NPV0) as shown in table 4.
О”Terminal Value X% = Original Terminal Value * (1+X%)NPV1 = ОЈ Discounted FCF 01-06 + Terminal ValueUsing the data calculated in the previous