1. AssumingTottenhamHotspurscontinue in their current stadium following their current player strategy:

1. Perform a DCF analysis using the cash flow projections given in the case. Based on this DCF analysis, what is the value of theHotspurs?
2. Perform a multiple analysis. Based on the multiples analysis, is the value ofTottenhamany different?
3. At its current stock price of13.80, isTottenhamfairly valued?

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

1. Build the new stadium
2. Sign a new striker
3. 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
• For DCF analysis, you will also need to include capital acquisitions by year and change the net working capital by year
• You also 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 (this is shown in the set up spreadsheet posted as an announcement)
• 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.

For the new striker scenario, the problem indicates that the striker would be responsible for an increase in 12 goals per season, but how does this translate into new revenue?As this calculation is a little beyond the scope of this course, I am providing the attached calculation of incremental player revenue that you can use.It uses base line revenue to calculate striker incremental revenue.

It assumes that those 12 goals translate into a 25% increase in revenue, but that 25% is limited by the 20% that the new striker is expected to be injured and is limited by the 25% of the revenue that can be leveraged in the old stadium.Accordingly, you may use the following numbers from the attached spreadsheet for the new striker incrementalrevenue.

4.04 4.40 4.80 5.23 5.70 6.21 6.77 7.38 8.05 8.77

TheTottenhamproblem is a Discounted Cash Flow analysis.

What data do we need to conduct a DCF analysis?For the base case set up, we need:

1.To calculate free cash flows

a.Income Statement (inTottenhamproblem)

i.EBIT

ii.Depreciation

iii.Taxes (EBIT * Tax Rate)

b.Balance Sheet

i.Change in NWC - For theTottenhamproblem, we are going to calculate NWC for year 0 and year 1 and calculate change in NWC then assume that NWC changes in relationship to the changes in revenue.You can assume NWC in Year 0 is (43.24).

ii.CapEx- The problem says that in year 0, the team expects 3.3 M in capital maintenance and that this cost will grow at 4%.This will serve as the basis for theCapEx.

2.To calculate a terminal value

a.Discount Rate - the Discount Rate for the problem is 10.25%

b.Growth Rate - the Growth Rate in year 13 is 4%

c.Steady State Cash Flow - years 1 through 12 are the growth period forTottenhamand year 13 is steady state.Accordingly, the FCF from year 13 should be used to calculate the terminal value.

3.To find the net present value of the FCF

a.Discount Rate - the Discount Rate for the problem is 10.25%

b.FCF and Terminal Value - the best way to set this up is to calculate FCF for years 1 through 13.

Use year 13 to calculate the terminal value.Link the terminal value calculation to the cell below the year 12 FCF.Use a new row for each year's FCF plus the terminal value row (you will only have a terminal value for year 12).This will produce a single row of cash flows that can be included in an excel NPV function.

Once you have set up the base case, you need to copy the base case to a new sheet/tab and modify the spreadsheet to reflect the impact of building a new stadium, signing a new player and doing both.

Stadium

The new stadium project has a number of impacts on cash flow including

Income Statement Impacts (these will flow through to your FCF EBIT starting number)

• Incremental Attendance Revenues for all years
• Incremental Sponsorship Revenues for all years
• Incremental Operating Costs for all years
• Increased Depreciation over the 10 year life of the stadium

Impacts not reflected in EBIT and that will have to be reflected in FCF calculation

• Capexof stadium build costs in year 1 and 2

If your base case works correctly and the formulas are adjusted to capture the incremental impacts, those incremental impacts should flow through to FCF, enterprise value and stock valuation.

Player and Both

The new player has similar direct and indirect impacts as the stadium and you will find these impacts in the problem narrative.For both these scenarios, you will also copy the base case spreadsheet and make adjustments.Make sure that you understand the limitation on new player revenue associated with playing at the old stadium.

Assets Current assets: Cash and equivalents 26.29 Investments, available for sale 0.63 Inventory - Merchandise 1.17 Accounts Receivable 19.99 Total current assets 48.07 Property and equipment, net 55.78 Intangible assets. net 49.35 Total assets 153.20 Liabilities and Stockholder Equity Current liabilities: Accounts payable 64.40 Total current liabilities 64.40 Long-term debt and deferred interest, net of current 43.08 portion Total liabilities 107.48 Total stockholders' (decit) equity 45.73 Total liabilities and stockholders' equity 153.20 Shares Outstanding (millions of shares) 9.29 Market Capitalization 128.20 Ewan us- Attendance Sponsorship Broadcast Merchandise Other Total Oparatlng Coats Payroll Stadium Operating Expenses Other Total EBITDA Depreciation EBIT Interest Taxes N91 Income 2007 17.40 15.70 23.70 5.20 7.10 74.1 I] 50.92 16.33 1.80 39.1 0 5.00 2.20 2.30 2.26 0.19 0.35 Funds! 1 2003 13.97 1 7.11 31 .23 5.67 7.74 30.77 56.01 1 7.04 1.37 74.92 5.65 2.29 3.56 2.46 0.33 0.71 2 2009 20.67 13.65 34.1 I] 6.1 3 3.44 33.04 61.62 17.72 1 .95 61.23 6.76 2.33 4.33 2.69 0.59 1.10 3 2010 22.53 20.33 37.17 6.73 9.19 95.96 67.73 13.43 2.02 33.23 7.73 2.47 5.25 2.93 0.32 1.52 4 2011 24. 56 22.16 40. 51 1.34 10.02 104.60 74. 56 19.16 2.11 95.62 6.77 2.57 6.20 3.19 1.05 1.96 5 2012 26.77 24.16 44.16 3.00 10.92 114.01 32.01 19.93 2.19 104.13 9.83 2.63 7.21 3.43 1.30 2.42 6 2013 29.13 26.33 43.13 3.72 11.91 124.27 90.21 20.73 2.28 113.22 11 .06 2.73 3.27 3.79 1.57 2.91 2014 31.31 23.70 52.46 9.51 12.93 135.46 99.23 21.55 2.37 123.16 12.30 2.90 9.41 4.13 1.35 3.43 2015 34.67 31.23 57.19 10.36 14.15 147.65 109.16 22.42 2.46 134.04 13.61 3.01 10.60 4.50 2.13 3.96 2010 37.79 34.10 62.33 1 1.29 1 5.42 160.94 120.07 23.31 2.56 145.95 14.99 3.13 1 1.36 4.91 2.43 4.52 10 2017 41.19 37.17 67.94 12.31 16.31 175.42 132.03 24 .25 2.63 156.99 16.46 3.26 13.17 5.35 2.74 5.09 11 2013 44.90 40.51 74.06 13.42 13.32 1 91.21 145.29 25.22 2.77 173.28 17.93 3.39 14.55 5.63 3.05 5.66 12 2019 48.94 44.16 30.72 14.63 19.97 203.42 159.32 26.22 2.68 188.92 19.49 3.52 15.97 6.36 3.37 6.25 13 2020 50.90 45.93 33.95 15.21 20.77 216.76 166.21 27.27 3.00 196.43 20.27 3.66 16.31 6.61 3.50 6.50