F402

Fall 2018

Tottenham Hotspur plc

Case Questions

Due: September 13, 2018

1.) What is Tottenham Hotspur's fair equity value per share if it does not build a new

stadium and does not acquire a new player? Perform a Discounted Cash Flow (DCF)

analysis of the company as of January 1, 2008. You can assume that risk premia for corporate

bonds in the UK are the same as in the U.S. Note that net working capital is negative

for the club, because tickets are typically prepaid. Net working capital is assumed to

increase in proportion with total revenues. At its current stock price, is Tottenham Hotspur

fairly valued, overvalued, or undervalued?

2.) What is Tottenham Hotspur's fair equity value per share if it builds a new stadium but

does not acquire a new player? Perform a DCF analysis of the company as of January 1,

2008. Based on this analysis, should Tottenham build a new stadium? Here and in questions

3 and 4 below, you can assume that Tottenham Hotspur's capital structure and equity

beta remain the same as in question 1.

3.) What is Tottenham Hotspur's fair equity value per share if it does not build a new

stadium but acquires a new player? Note that the past ten years of Premiership revenue

and point total data suggest that for every 1% increase in a team's point total, a team

could anticipate a 1.52% improvement in revenues. A regression of points on net goals

yields a slope coefficient of 0.68, suggesting that each net goal increases points by an average

of 0.68. Perform a DCF analysis of the company as of January 1, 2008. Based on

this analysis, should Tottenham acquire a new player?

4.) What is Tottenham Hotspur's fair equity value per share if it builds a new stadium

and acquires a new player? Note again that the past ten years of Premiership revenue and

point total data suggest that for every 1% increase in a team's point total, a team could

anticipate a 1.52% improvement in revenues. Moreover, a regression of points on net

goals yields a slope coefficient of 0.68, suggesting that each net goal increases points by

an average of 0.68. Perform a DCF analysis of the company as of January 1, 2008. Note

that building a new stadium and acquiring a new player leads to the revenue increases

due to the stadium as well as additional revenue increases due to the new player, which

are higher if a new stadium is built. Based on this analysis, should Tottenham build a new

stadium and acquire a new player?

5.) How can you reconcile your answers to questions 2, 3, and 4?