University:
California State University, Northridge
Course:
FIN 635 | Corporate Finance
Academic year:

2022
Views:

489

Pages:

1
Author:

Hallie Randolph

NETSCAPE'S INITIAL PUBLIC OFFERING - Valuation Sheet Assumptions Risk Free Rate Equity Risk Premium Corporate tax rate Ahares outstanding Netscape's cost of equity Case Questions Growth rate (trial & error) Income Statement Calculations Revenues Cost of Sales Gross Profit Operating Expenses Since the media firms were among the largest stakes in the company, 11% from page 6, and since their 1 contribution was 18 Million USD, we can conclude that they valued the company at 18M/0.11, being 163,636,363 USD From Exhibit 3, we can extract the following info for Microsoft: Shares outstanding: 627,000; P/E ratio: 39 2 and EPS 2.32. Accordingly the Market Value is: 2.32 x 39 x 627,000 = 56,730,960 USD The principal reasons for going public were to fund expected future growth, to stockpile cash reserves for 3 potential acquisitions, and to gain visibility and credibility within the industry. 6.71% 6.00% 34.00% 33,001 12.00% 52.76% 1995 17,321 1,801 15,520 14,013 1996 1997 1998 1999 2000 2001 2005 94,309 9,808 84,501 38,573 144,062 14,982 129,080 44,515 220,062 22,886 197,176 45,993 336,156 513,495 784,390 1,198,194 34,960 53,404 81,577 124,612 301,196 460,092 702,813 1,073,582 70,257 107,321 163,937 250,423 151,183 80,983 230,939 352,771 538,876 123,705 188,966 288,655 1,507 6,374 4,948 9,737 11,600 14,873 23,893 22,720 45,929 34,706 84,565 53,015 (4,867) - (4,789) - (3,274) - 1,173 - 11,223 - 31,550 10,545 (4,789) (9,656) (3,274) 1,173 11,223 21,004 46,332 70,774 (11,757) (534) - - - (4,867) Cash Flow Calculations 1995 1997 1998 Net Income Depreciation Capital Expenditures (4,867) 953 (7,933) (4,789) 1,455 (10,575) (3,274) 2,223 (13,796) 1,173 3,396 (17,472) 11,223 5,187 (21,188) 21,004 7,923 (23,962) 46,332 12,103 (23,767) 70,774 18,489 (36,305) Cash Flow Terminal Value (2005) Disccounting Periods (11,848) (13,908) (14,847) (12,903) (4,778) 4,965 34,669 52,958 PV (1995) (11,848) 1996 - (12,930) 1 2 (12,418) (11,836) 1999 3 (9,184) 2000 4 (3,037) 2001 5 2,818 823,160 440,936 70,200 107,234 163,805 250,220 23,868 36,459 55,694 85,075 Cumulative tax loss carry-forward IPO Offering Price 2004 61,739 6,421 55,318 31,425 Income before tax Taxes (4,867) 2003 40,417 4,203 36,214 24,614 Operating Income R&D Expenses NET INCOME 2002 26,459 2,752 23,707 18,759 2002 6 17,564 108,111 2003 80,896 2004 123,573 8 32,673 252,268 - 108,111 165,145 28,242 43,141 (55,457) (84,714) 7 23,956 165,145 - 382,224 129,956 44,562 - 2005 252,268 65,901 Extrapolation for CAPEX (129,405) 188,764 2,453,926 9 850,875 28.00 Conclusion Based on the above assumptions and simulating Cash Flows over the next 10 years, Netscape must grow at approximately 52.76% to justify a stock valuation of $28 per share 5.83% 10