Valuation This problem is self-contained. Below is information on forecasted balance sheets and income statements for WWE, along with other assumptions. Assume there will be no sales of Property & Equipment or Content Assets. Assume that all of the assets and liabilities on the 2020 balance sheet are carried at approximate fair value, except as noted below. The WWE brand is internally-developed and the concussion lawsuit has not been recognized on the balance sheet as a liability. Cost of capital is 8%.

Accounts Payable will decrease by 45 in 2021.

Accounts Receivable will decrease by 20 in 2021.

Accumulated Amortization on the Content Asset will increase by 1 O in 2021.

Accumulated Depreciation on PP&E will increase by 50 in 2021.

Book Value of Equity at year-end 2020 was 390.

Cash will increase by 1 O in 2021.

Concussion lawsuit. A litigation consultant estimates it will cost 60 to settle.

Content Asset fair value was 90 at year-end 2020.

Content Asset book value was 60 at year-end 2020.

Contributed Capital will decrease by 15 in 2021.

Cost of Content Asset fair value will increase by 100 in 2021.

Cost of Property, Plant and Equipment will increase by 75 in 2021.

Deferred Revenue will increase by 15 in 2021.

Income tax rate will be 25% in 2021.

Interest Expense will be 40 in 2021.

Interest Bearing Debt was 730 at year-end 2020.

Prepaid Expenses will increase by 10 in 2021.

Present Value of unlevered free cash flows beyond 2021 will total 3,500.

Present Value of dividends and repurchases beyond 2021 will total 2,800.

Property, Plant and Equipment book value was 428.7 at year-end 2020.

Property, Plant and Equipment fair value was 900 higher than the book-value at year-end 2020.

Retained Earnings will increase by 90 in 2021.

Shares Outstanding total 77 at year-end 2020.

WWE internally developed brand value fair was 1550 at year-end 2020.

Net Income will be 150 in 2021.

QUESTION:

You are trying to compute the value of one share of WWE stock as of December 31, 2020. There are items listed below that are potentially relevant to the valuation.

a) What is the value of one WWE share using the Balance Sheet model?

b) What is the value of one WWE share using the Discounted Cash Flow model?

c) What is the value of one WWE share using the Dividend Discount model?Ill: Valuation

Answer rating: 100% (QA)

a Value of one WWE share using the Balance Sheet model The value of one share using the balance shee... View the full answer