Assume you have ONLY the abandon option given in the question: 1) Draw the Decision
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Assume you have ONLY the abandon option given in the question:
1) Draw the Decision Tree
2) What is the NPV with the abandon option?
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Page-views growth Page-views sigma Yearly EBITDA multiple Page views Month Conversion rate Margin per purchase Monthly operating cost EBITDA Valuation 2 Page Views Growth 3 Page views sigma 4 Yearly EBITDA multiple 5 6 Page Views 7 Conversion Rate 8 Margin per purchase 9 Monthly operating cost 10 EBITDA 11 Valuation A Scor-eStore Dot Com Business A 1 2 Page Views Growth 3 Page views sigma 4 Yearly EBITDA multiple 5 6 Page Views 7 Conversion Rate 8 Margin per purchase 9 Monthly operating cost 10 EBITDA 11 Valuation 0.6 0.55 15.1 Scor-eStore Dot-Com Business 0.88 Develop prototype $ $ $ 60% annual 0.55 annual volatility 15.1 110.00 14% Exhibit 2 SCOR-eSTORE.COM Spreadsheet Model of a Viable Website Business with Formulas 5.27 115.50 =CB.Triangular(90,110,130) =CB.Triangular(0.08,0.14,0.2) All numbers in thousands Initial-Mo. 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 13 Month 14 Month 15 Month 16 Month 17 Month 18. 14% =Risk Triang(90,110,130) =Risk Triang(0.08,0.14,0.2) 0.88 =Risk Triang(4.54,5.27,6) Scor-e Store Dot Com Business 0.6 0.55 15.1 Exhibit 1 SCOR-eSTORE.COM Competitive vie Winning website? B SCOR-eSTORE Timeline Operate website pilot =MAX(0,Yearly_EBITDA_multiple*12*EBITDA) =Yearly_EBITDA_multiple*12*EBITDA 14% B Launch and run business for six months 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 5.27 5.27 5.27 5.27 8.28 $8.96 $ 9.67 $ 10.42 $ 11.20 $ 12.03 1,501 $ 1,623 $1,752 $1,888 $ 2,030 $2,179 14% 121.28 127.34 133.71 140.39 147.41 154.78 162.52 170.65 179.18 188.14 5.27 14% =CB.Triangular(4.54,5.27,6) =Page_Views*Conversion_Rate *Margin_per_purchase-Monthly_operating_cost Exhibit 2 (continued) Crystal Ball Formulas Initial-Mo. 7 14% Initial =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost annual annual volatility =$B$7 Expand? =B9 @Risk Formulas 14% $ 12.89 12 5.27 $ 2,336 =B8+CB.Normal(0,0.08) annual annual volatility =B9 Continue to run business months 7 to 12 14% 5.27 14% $ 0.88 $ 0.88 $ 0.88 $ 0.88 5.27 5.27 $ 16.80 =MAX(0,Yearly_EBITDA_multiple*12*EBITDA) C 14% Buyout? =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost 5.27 =B6+B6*(Page_Views_Growth*(1/12)+Page_views_sigma*SQRT(1/12) *CB.Normal(0,1)) =Yearly EBITDA_multiple*12*EBITDA 14% C 18 $13.80 $14.75 $15.75 $ 17.91 $ 2,500 $ 2,673 $ 2,855 $3,045 $3,245 14% =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost $ 0.88 5.27 Month 8 =B6+B6* (Page_Views_Growth*(1/12)+Page_views_sigma*SQRT(1/12) * RiskNormal(0,1)) =$B$7 =B8+RiskNormal (0,0.08) Month 2 Page-views growth Page-views sigma Yearly EBITDA multiple Page views Month Conversion rate Margin per purchase Monthly operating cost EBITDA Valuation 2 Page Views Growth 3 Page views sigma 4 Yearly EBITDA multiple 5 6 Page Views 7 Conversion Rate 8 Margin per purchase 9 Monthly operating cost 10 EBITDA 11 Valuation A Scor-eStore Dot Com Business A 1 2 Page Views Growth 3 Page views sigma 4 Yearly EBITDA multiple 5 6 Page Views 7 Conversion Rate 8 Margin per purchase 9 Monthly operating cost 10 EBITDA 11 Valuation 0.6 0.55 15.1 Scor-eStore Dot-Com Business 0.88 Develop prototype $ $ $ 60% annual 0.55 annual volatility 15.1 110.00 14% Exhibit 2 SCOR-eSTORE.COM Spreadsheet Model of a Viable Website Business with Formulas 5.27 115.50 =CB.Triangular(90,110,130) =CB.Triangular(0.08,0.14,0.2) All numbers in thousands Initial-Mo. 7 Month 8 Month 9 Month 10 Month 11 Month 12 Month 13 Month 14 Month 15 Month 16 Month 17 Month 18. 14% =Risk Triang(90,110,130) =Risk Triang(0.08,0.14,0.2) 0.88 =Risk Triang(4.54,5.27,6) Scor-e Store Dot Com Business 0.6 0.55 15.1 Exhibit 1 SCOR-eSTORE.COM Competitive vie Winning website? B SCOR-eSTORE Timeline Operate website pilot =MAX(0,Yearly_EBITDA_multiple*12*EBITDA) =Yearly_EBITDA_multiple*12*EBITDA 14% B Launch and run business for six months 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 $ 0.88 5.27 5.27 5.27 5.27 8.28 $8.96 $ 9.67 $ 10.42 $ 11.20 $ 12.03 1,501 $ 1,623 $1,752 $1,888 $ 2,030 $2,179 14% 121.28 127.34 133.71 140.39 147.41 154.78 162.52 170.65 179.18 188.14 5.27 14% =CB.Triangular(4.54,5.27,6) =Page_Views*Conversion_Rate *Margin_per_purchase-Monthly_operating_cost Exhibit 2 (continued) Crystal Ball Formulas Initial-Mo. 7 14% Initial =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost annual annual volatility =$B$7 Expand? =B9 @Risk Formulas 14% $ 12.89 12 5.27 $ 2,336 =B8+CB.Normal(0,0.08) annual annual volatility =B9 Continue to run business months 7 to 12 14% 5.27 14% $ 0.88 $ 0.88 $ 0.88 $ 0.88 5.27 5.27 $ 16.80 =MAX(0,Yearly_EBITDA_multiple*12*EBITDA) C 14% Buyout? =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost 5.27 =B6+B6*(Page_Views_Growth*(1/12)+Page_views_sigma*SQRT(1/12) *CB.Normal(0,1)) =Yearly EBITDA_multiple*12*EBITDA 14% C 18 $13.80 $14.75 $15.75 $ 17.91 $ 2,500 $ 2,673 $ 2,855 $3,045 $3,245 14% =Page_Views*Conversion_Rate*Margin_per_purchase-Monthly_operating_cost $ 0.88 5.27 Month 8 =B6+B6* (Page_Views_Growth*(1/12)+Page_views_sigma*SQRT(1/12) * RiskNormal(0,1)) =$B$7 =B8+RiskNormal (0,0.08) Month 2
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Related Book For
Fraud examination
ISBN: 978-0538470841
4th edition
Authors: Steve Albrecht, Chad Albrecht, Conan Albrecht, Mark zimbelma
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