Read the two articles, entitled The Clippers are Worth Nowhere Near What Ballmer is Paying and Why The Clippers are Worth $2 Billion, and respond to the following questions. Where there is incomplete information, provide reasonable assumptions. 1. We are told the Clippers revenues at the time Steve Ballmer bought them was $128 million, and its profit was $15 million. a) At a purchase price of $2 billion, what is Ballmers ROA? b) To what level would the Clippers revenues need to rise in order for Ballmer to generate a ROA of 5%? 10%?

2. Assume the Clippers fixed costs (including things like Player salaries, administration and facilities costs) are equal to $100 million. Further assume that the Clippers TV and sponsorship revenue is $75 million and its only other source of revenue is ticket sales. a) How many tickets would the Clippers need to sell in order to breakeven, if the average contribution margin per ticket is $25? b) How many tickets would the Clippers need to sell in order to breakeven, if the average contribution margin per ticket is $50? c) The Clippers play 41 home games a season in a 20,000 seat arena. What is the likelihood of breaking even under scenarios a) and b) above? d) Are there any other variables that have not been contemplated above that could impact your response to c) above?