Darren Rovell, CNBC sports business reporter, discussed payments made to Silna brothers Ozzie and Dan in his June 28, 2007 blog post. That deal came to an end in 2014 when the brothers sold most of their equity to the NBA in 2014 reportedly $500MM. (You can read more about it in the January 7, 2014, issue of Forbes magazine.) Determine what combinations of discount rates and growth rates would get to 500MM in financial value for the Silnas' shares (assume those shares account for 1/7 of four NBA team's television revenue as per the Rovell blog post) with the NBA's new TV deal, which begins in 2016-2017 and pays the NBA $2.67 billion per year through the 2024-2025 season. The NBA's television deal running from the 2008-2009 season through the 2015-2016 season paid the family $18.9 million annually. Choose the valuation date to be one year prior to the new deal beginning (e.g., 2015).

Q. Use the above information and the following parameters to calculate the NPV of the contract.

*The valuation date is January 1, 2009.

*Assume that the Silnas received their first payment on January 1, 2009, and that the payments will continue annually thereafter.

*Assume that the Silnas are taxed at 35% for their income on this deal.

*Assume that their payments from this NBA deal will grow at 2% per year in perpetuity after the final year of this contract. (Although the Silnas' deal ended in reality, for purposes of this exercise we will assume that the deal will continue forever)

*Assume a discount rate of 8%.

*Create a table that shows the results you found and gives a brief description of your steps, assumptions, and so forth.

*What would the value be if the discount rate were 10% and the CF growth rate were 4%?

Answer rating: 100% (QA)

Table 1 Calculations of the NPV of the Silna Brothers Shares Calculation Description 1 Present Value ... View the full answer