Perform a DCF analysis using the cash flow projections in Exhibit 5 of the case.Calculate the NPV and determine the overall value of Tottenham.At its current stock price of $13.80, is Tottenham fairly valued?

Please answer the following questions with financial support for each scenario and put the answers in excel.

1.Using a DCF/NPV approach, provide your recommendation to management regarding each of the following decisions/scenarios:

Scenario 1: Build the new stadium and do not sign the new striker

The major assumptions behind building a new stadium include:

- We assume 2007 is year 0 and discount all cash flows back to their 2007 values

- Increase of attendance revenue by 40% vs forecasted in base case scenario

- Increase in sponsorship revenue by 20% vs forecasted in base case scenario

- Increase in stadium opex by 14% vs forecast in base case scenario

- We assume the stadium starts getting built in 2008 and as a result capex depreciation of the

stadium begins from 2010 (i.e., once the stadium is completed) and depreciates to 0 by 2019 (10

years from completion)

- Maintenance capex and depreciation of maintenance Capex growing at 4% per year- same as base

case scenario

Scenario 2: Sign the new striker but do not build the new stadium

The major assumptions behind building a new stadium include:

We assume 2007 is year 0 and discount all cash flows back to their 2007 values

- The capped revenue increase of 5% due to stadium size limit ( of 24% * 80%) during the years

the player plays. We also multiply this by the probability of having a healthy player to get the

expected revenue.

- 52 week year with a the player salary increasing at 10% per year from 2009

- A tax deductible transfer fee of 20M

Scenario 3: Build the new stadium and sign the new striker

The major assumptions behind the scenario of building a new stadium and recruiting a new striker include

the following:

- We assume 2008 is year 0 and discount all cash flows back to their 2008 values

- A full overall revenue increase of 24%* 80% (We also multiply this by the probability of having

a healthy player to get the expected revenue) during the year the player plays.

- Increase of attendance revenue by 40% vs forecasted in base case scenario

- Increase in sponsorship revenue by 20% vs forecasted in base case scenario

- We use the same two Capex and capex depreciation assumptions from scenario 1

- A tax deductible transfer fee of 20M

2.What would be the impacting stock price in scenarios a, b, and c above?

3.If you do not agree with the projections/assumptions in the case or below, what would you change and why?How would it impact the outcome, and ultimately, your recommendation?

Some additional notes/hints:

1.Keep money in

2.NPV = Enterprise value

3.Assume Net W/C increases at same rate as total revenue

4.Assume market premium = 5%

5.Assume interest rate on debt = 6.4%

6.For every 1% increase in points, revenue increases by 1.52%.

7.New striker is expected to increase net points by 16%. (note: can ignore other comments related to relative performance, team rankings, etc.)

8.Assume funding available at current cost of capital. We will discuss capital decision making in a couple weeks.

Current Forecast 0 2 3 5 6 8 9 10 11 12 13 Revenue 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Attendance 17.40 18.97 20.67 22.53 24.56 26.77 29.18 31.81 34.67 37.79 41.19 44.90 48.94 50.90 Sponsorship 15.70 17.11 18.65 20.33 22.16 24.16 26.33 28.70 31.28 34.10 37.17 40.51 44.16 45.93 Broadcast 28.70 31.28 34.10 37.17 40.51 44.16 48.13 52.46 57.19 62.33 67.94 74.06 80.72 83.95 Merchandise 5.20 5.67 6.18 6.73 7.34 8.00 8.72 9.51 10.36 11.29 12.31 13.42 14.63 15.21 Other 7.10 7.74 8.44 9.19 10.02 10.92 11.91 12.98 14.15 15.42 16.81 18.32 19.97 20.77 Total 74.10 80.77 88.04 95.96 104.60 114.01 124.27 135.46 147.65 160.94 175.42 191.21 208.42 216.76 Operating Costs Payroll 50.92 56.01 61.62 67.78 74.56 82.01 90.21 99.23 109.16 120.07 132.08 145.29 159.82 166.21 Stadium Operating Expenses 16.38 17.04 17.72 18.43 19.16 19.93 20.73 21.55 22.42 23.31 24.25 25.22 26.22 27.27 Other 1.80 1.87 1.95 2.02 2.11 2.19 2.28 2.37 2.46 2.56 2.66 2.77 2.88 3.00 Total 69.10 74.92 81.28 88.23 95.82 104.13 113.22 123.16 134.04 145.95 158.99 173.28 188.92 196.48 EBITDA 5.00 5.85 6.76 7.73 8.77 9.88 11.06 12.30 13.61 14.99 16.43 17.93 19.49 20.27 Depreciation 2.20 2.29 2.38 2.47 2.57 2.68 2.78 2.90 3.01 3.13 3.26 3.39 3.52 3.66 EBIT 2.80 3.56 4.38 5.26 6.20 7.21 8.27 9.41 10.60 11.86 13.17 14.55 15.97 16.61 Interest 2.26 2.46 2.69 2.93 3.19 3.48 3.79 4.13 4.50 4.91 5.35 5.83 6.36 6.61 Taxes 0.19 0.38 0.59 0.82 1.05 1.30 1.57 1.85 2.13 2.43 2.74 3.05 3.37 3.50 Net Income 0.35 0.71 1.10 1.52 1.96 2.42 2.91 3.43 3.96 4.52 5.09 5.66 6.25 6.50Assets Current assets: Cash and equivalents 26.29 Investments. available for sale 0.63 Inventory - Merchandise 1.17 Accounts Receivable 19.99 Total current assets 48.07 Property and equipment, net 55.78 Intangible assets, net 49.35 Total assets 153.20 Liabilities and Stockholder Equity Current liabilities: Accounts payable 64.40 Total current liabilities 64.40 Long-temi debt and deferred interest, net of current 43.08 portion Total liabilities 107.48 Total stockholders' (decit) equity 45.73 Total liabilities and stockholders' equity 153.20 Shares Outstanding (millions of shares) 9.29 Market Capitalization 128.20