LSE / Lent Term – 2015

FM421 – Applied Corporate Finance

Case Assignments

• You will find an Excel file with all the exhibits from the case on Moodle.

• Assignments MUST be submitted before class on Moodle.

• Your assignment should not exceed 5 pages including appendices.

“Tottenham Hotspur”

To Do

1. Read case: HBS 9-209-059: Tottenham Hotspur Plc. There is an Excel spreadsheet to help you with the base numbers.

2. Read lecture slides.

Case Preparation Questions

State clearly all assumptions that you make and defend their choices whenever possible.

1. Assume that Tottenham Hotspur continues in their current stadium following their current player strategy. Perform a discounted cash flow (DCF) analysis using the cash flow projections given in the case. For all CAPM calculations, use the risk-free rate given in Exhibit 1 and assume a market premium of 5%. Also assume that Tottenham’s debt has zero beta. At its current stock price of £13.80, is Tottenham fairly valued?

2. Provide an alternative valuation of Tottenham based on multiples. Compare your findings with those from Question 1 and, in the light of your results, discuss the relative advantages and disadvantages of multiples versus DCF valuation methods.

3. Using a DCF approach, evaluate each of the following decisions:

a) Build the new stadium b) Sign a new striker c) Build the new stadium and sign a new striker.

• Note that the past 10 years of Premiership revenue and point total data suggest that for every 1% increase in a team’s point total, a team could anticipate a 1.52% improvement in revenues.

• To estimate the effect of the new striker on revenues, use data from Exhibit 2, and state your assumptions clearly.

• Ignore the possible effects of qualifying for European tournaments on