Sampa Video Solution Discussion Sampa Video Case This case is useful for illustrating how we do NPV analysis when cash flows are risky, illustrating the idea of a terminal value, and also for thinking about what kinds of advantages make for positive NPV projects. The case discusses Sampa Video, the second largest chain of video rental stores in the greater Boston area, and their consideration of an expansion into an online market. What we have to do is evaluate the decision. Sampa Video –
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SaSampa Video, Inc. 10/12/10 12.27 9-201-094 REV: OCTOBER 7, 2003 GREGOR ANDRADE Sampa Video, Inc. Sampa Video, Inc. was the second largest chain of videocassette rental stores in the greater Boston area, operating 30 wholly owned outlets. Begun in 1988 as a small store in Harvard Square catering mostly to students, the company grew rapidly, primarily due to its reputation for customer service and an extensive selection of foreign and independent movies. These differentiating factors allowed
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G R E G O R A N D R A D E Sampa Video, Inc. 9 - 2 0 1 - 0 9 4 R E V : O C T O B E R 7 , 2 0 0 3 Sampa Video, Inc. was the second largest chain of videocassette rental stores in the greater Boston area, operating 30 wholly owned outlets. Begun in 1988 as a small store in Harvard Square catering mostly to students, the company grew rapidly, primarily due to its reputation for customer service and an extensive selection of foreign
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DUKE UNIVERSITY Fuqua School of Business FINANCE 251F/351 Individual Assignment #2 Sampa Video, Inc. Prof. Simon Gervais Spring 2010 – Term 1 In this case, you have to assess the viability of the home-delivery project that Sampa Video is considering. You are asked to do your analysis using WACC, and then using APV. In both cases, you can use the data in Exhibit 2 to calculate the unlevered free cash flows of the project. Assume that these unlevered free cash flows will grow at 5% per year
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DUKE UNIVERSITY Fuqua School of Business FINANCE 351 - CORPORATE FINANCE Sampa Video, Inc. Prof. Simon Gervais Fall 2011 – Term 2 In this case, you have to assess the viability of the home-del ivery project that Sampa Video is considering. You are asked to do your analysis using WACC, an d then using APV. In both cases, you can use the data in Exhibit 2 to calculate the free cash flow s of the project. Assume that these free cash flows will grow at 5% per year in perpetuity followin
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Sampa Video Case Study The NPV of the project entirely equity financed is $1,228. The appropriate discounted rate is 15.8%. The APV of the project assuming the firm uses fixed debt of $750 thousand and keeps the level of debt constant in perpetuity is $1,528. The NPV of the project using after-tax WACC and assuming a constant 25% target debt-to-value ratio in perpetuity is $1,470. Answer 1 – 3, please see attached spreadsheet for calculations. 25% debt balances at year end imply
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Sampa Video Sampa Video: essay: Question 1] What are the annual projected free cash flows? What is the NPV of the project assuming the firm was entirely equity financed? What discount rate is appropriate? Annual Projected Free Cash Flows Detailed annual projected free cash flows calculations are summarized in APPENDIX I. Free Cash Flows (FCF) are calculated using following relationship. FCF = EBIAT + Depreciation - Investments In brief, annual projected free cash flows are as following
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Sampa Video, Inc. 1. What is the appropriate discount rate and the value of the project assuming the firm is going to fund it with all equity? “The discount rate of a project should be the expected return on a financial asset of comparable risk” To estimate Sampa Video’s cost of equity capital we used the CAPM model, in which rf refers to the risk free rate, to the market risk premium, and ß to the company Beta (Table 1). Since the Beta of the company wasn’t known, we decided to use an
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Finance (Course 35200) Spring 2016 Professor Kelly Shue Assignment # 2 –Sampa Video Names: | Signatures: | Student # | Section: | Louise (Chiao-ling) Chang | | 458381 | 03 | Joonmo Lee | | 458378 | 03 | Sonja Schut | | 452395 | 03 | Alvin(Yaxin) Yu | | 456062 | 03 | Honor Code: I pledge my honor that I have not violated the Honor Code in preparation of this case assignment. 1. What are the annual projected free cash flows? What is the
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Sampa Video: essay: Question 1] What are the annual projected free cash flows? What is the NPV of the project assuming the firm was entirely equity financed? What discount rate is appropriate? Annual Projected Free Cash Flows Detailed annual projected free cash flows calculations are summarized in APPENDIX I. Free Cash Flows (FCF) are calculated using following relationship. FCF = EBIAT + Depreciation - Investments In brief, annual projected free cash flows are as following.
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