1. Assuming Tottenham Hotspurs continue in their current stadium following their current player strategy:

Perform a DCF analysis using the cash flow projections given in the case. Based on this DCF analysis, what is the value of the Hotspurs?

Perform a multiple analysis. Based on the multiples analysis, is the value of Tottenham any different?

At its current stock price of 13.80, is Tottenham fairly valued?

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

Build the new stadium

Sign a new striker

Build the new stadium and sign a new striker

3. Based on the results from 2, select a best choice and provide a logical argument to support it.

Hints:

There are multiple ways to find the answer; individual's answers may vary. Be sure to provide a logical reasoning for your assumptions.

Exhibit 5 provides values for Discounted Cash Flows

DCF can be done a couple ways, based on EBITDA or calculating Free Cash Flows

If you use the Free Cash Flow Method, you will also need to include capital acquisitions by year and change the net working capital by year

Regardless of method, you need to determine a terminal value of the business (the present value of a perpetuity)

Use 10.25% as the discount rate

Remember to determine the value you will need to subtract the value for debt

For adding a new stadium and new striker, you need to adjust your original DCF model and find the new cash flows. Remember to adjust for related revenues and expenses and recalculate the value of the enterprise.

Assume the Weighted Average Cost of Capital (WACC) is 10.25%

Exhibit 5 Tottenham Pro Forma Income Statement (millions of pounds) Current Forecast evenue ttendance Sponsorship roadcast Merchandise Other otal 2008 2009 2010 2011 2012 2013 2014 2015 2020 7.40897 20.67 22.5324.56 26.77 29.18 31.8134.67 37.79 41.1944.90 48.94 50.90 18.65 20.33 22.16 24.16 26.33 28.70 31.28 34.10 37.17 40.51 44.16 45.93 28.70 31.28 34.10 37.1740.51 44.16 48.13 52.46 57.19 62.33 67.94 74.06 80.7283.95 13.42 14.63 15.21 18.32 19.9720.77 74.10 80.77 88.04 95.96 104.60 114.01 124.27 135.46 147.65 160.94175.42 191.21 208.42 216.76 2007 2016 2017 2018 2019 15.70 17.11 5.20 8.72 9.19 10.02 10.92 11.91 7.34 8.00 9. 51 10.36 11.29 2.31 7.74 2.98 14.15 15.42 16.81 perating Costs 50.92 56.01 61.62 67.7874.56 82.01 90.21 99.23 109.16 120.07 132.08 145.29 59.82 166.21 Stadium Operating Expenses 6.38 17.047.72 18.43 19.16 19.93 20.73 21.55 22.42 23.3 24.25 25.22 26.22 27.27 1.80 2.02 2.28 2.37 2.46 3.00 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 2.56 2.66 2.77 2.88 BITDA 6.76 2.38 4.38 2.69 0.59 8.77 2.57 6.20 9.88 1.06 12.30 13.6 2.68 7.21 4.9916.43 7.93 19.49 20.27 3.66 Depreciation 2.20 2.80 2.26 2.47 5.26 2.93 0.82 2.78 8.27 3.79 2.90 3.39 3.52 0.60 11.86 13.17 14.55 5.97 16.6 nterest axes Net Income 5.35 2.74 5.83 3.05 5.66 6.36 3.37 6.25 1.30 2.43 3.50 0.35 6.50 ouce: Compiled from company annual report 2007, http://admin.tottenhamhotspur.com/uploads/assets/docstore/old/tottenham_ar07 pdf, accessed August 2008, as well as internal company re Exhibit 5 Tottenham Pro Forma Income Statement (millions of pounds) Current Forecast evenue ttendance Sponsorship roadcast Merchandise Other otal 2008 2009 2010 2011 2012 2013 2014 2015 2020 7.40897 20.67 22.5324.56 26.77 29.18 31.8134.67 37.79 41.1944.90 48.94 50.90 18.65 20.33 22.16 24.16 26.33 28.70 31.28 34.10 37.17 40.51 44.16 45.93 28.70 31.28 34.10 37.1740.51 44.16 48.13 52.46 57.19 62.33 67.94 74.06 80.7283.95 13.42 14.63 15.21 18.32 19.9720.77 74.10 80.77 88.04 95.96 104.60 114.01 124.27 135.46 147.65 160.94175.42 191.21 208.42 216.76 2007 2016 2017 2018 2019 15.70 17.11 5.20 8.72 9.19 10.02 10.92 11.91 7.34 8.00 9. 51 10.36 11.29 2.31 7.74 2.98 14.15 15.42 16.81 perating Costs 50.92 56.01 61.62 67.7874.56 82.01 90.21 99.23 109.16 120.07 132.08 145.29 59.82 166.21 Stadium Operating Expenses 6.38 17.047.72 18.43 19.16 19.93 20.73 21.55 22.42 23.3 24.25 25.22 26.22 27.27 1.80 2.02 2.28 2.37 2.46 3.00 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 2.56 2.66 2.77 2.88 BITDA 6.76 2.38 4.38 2.69 0.59 8.77 2.57 6.20 9.88 1.06 12.30 13.6 2.68 7.21 4.9916.43 7.93 19.49 20.27 3.66 Depreciation 2.20 2.80 2.26 2.47 5.26 2.93 0.82 2.78 8.27 3.79 2.90 3.39 3.52 0.60 11.86 13.17 14.55 5.97 16.6 nterest axes Net Income 5.35 2.74 5.83 3.05 5.66 6.36 3.37 6.25 1.30 2.43 3.50 0.35 6.50 ouce: Compiled from company annual report 2007, http://admin.tottenhamhotspur.com/uploads/assets/docstore/old/tottenham_ar07 pdf, accessed August 2008, as well as internal company re