Caste Study Sirius Satellite Radio Case

On July 5, 2021, Sirius Satellite Radio announced that it had reached a settlement with Howard Stern to stream his radio show exclusively on his system. As a result of this announcement, Sirius' stock price rose dramatically. is currently working as a stock analyst for a large investment firm and XM Radio, also A satellite radio company is one of the companies that keeps track. Your boss he wants to be prepared if XM follows Sirius in trying to sign a big personality. For the Therefore, he wants you to estimate the net cash flows that the market had anticipated since Stern's signature. The potential deal was rumored for some time before the announcement. As a result, Sirius' stock price rose several days before the announcement. For the Therefore, your boss advises that the best way to capture all the value is to take the change in the stock price from June 6, 2021 to August 4, 2021. You nod nodding in agreement, trying to look like he understands how to proceed. You guys relatively new to the job and the term NPV is somewhat familiar to you. To estimate the cash flows assume: Initial investment moment zero: $4.5 MM Net annual net cash flow is as follows: 35349776 Discount rate: 7.5%

4. Calculate the NPV and interpret the result.

5. Calculate the IRR and interpret the result against the given cost of capital.

6. Calculate the payback period of the investment at current prices.

7. His boss mentioned that he believes the signing of Howard Stern by Sirius was really good for XM because it pointed out that the industry has valuable growth potential. To see if it appears to be correct, find the price action reaction of the percentage to XM (XMSR) over this same period.