You are required to show all work to receive full credit. D 7 if using a financial calculator, please list your inputs and the function used, E C 8 9 GameGo Inc. (GAME) is a digital gaming platform that is crushing its old school competition. GAME generates revenue from both 10 advertising on its platform as well as through in-app purchases. GAME's user base is expanding quickly and management is excited about 11 its future growth prospects. That said, as CFO, you are concerned about your cash position 12 13 Selected financial information: 14 (in millions, except per share data) 15 16 Income Statement 17 Annual Balance Sheet Actual 2020 18 Sales Actual 2020 $ 1,230.0 Cash $ 19 COGS 670.0 250.0 Accounts Receivables 20 Gross Margin 437.5 560.0 Inventory 325.0 21 SG&A 300.0 Other current assets 156.3 22 Restructuring Charge 50.0 Current Assets 1,168,8 23 Depreciation 85.0 PP&E 687.5 24 Op Income 125.0 Goodwill 168.8 25 Interest expense 15.0 Total Assets 2.025.0 26 Pre-tax 110.0 27 Taxes 22.0 Accounts payable 243.0 $ 88.0 28 Net income Accrued expenses 156.2 Other current liabilities 137.5 39 100.0 Current Liabilities 30 Common SVO 536.7 31 Long term Debt 187.5 0.88 Deferred taxes 32 EPS 2938 Total Liabilities 1,018.0 33 Shareholders' Equity 1.007.0 34 Total Liabilities & Equity $ 2,025.0 35 36 100.0 Common Shares Outstanding 37 38 Assumptions 39 Revenue is expected to grow 15% in 2021, 10% in 2022, 5% each year for the next two years. w $ 13 37 38 Assumptions Common Shares Outstanding 100.0 39 Revenue is expected to grow 15% in 2021, 10% in 2022, 5% each year for the next two years. 10 Cost of Goods Sold is expected to be 54.0% of revenue each year. 11 Selling, general and administrative expenses is expected to leverage 100 basis points per year as a % of Revenue. 12 Depreciation expense is expected to be $90.0 million each year, Maintenance capex is expected to be $50.0 million each year. 14 Working capital is expected to grow at the same rate as revenue. 15 All cash on the Balance Sheet is considered excess cash. 46 Taxes are projected to be 20% 17 This company wil, hopefully, continue forever. Assume the long-term perpetual growth rate is 2.0%. 18 Debt is trading at $995.00, has a 5-year term an 8.0% coupon rate paid semi-annually, and there are 187,500 bonds outstanding. 19 Beta is estimated at 1.5, treasuries yields are 2.5% and the expected return on the market is 12.5%. 50 The common stock is trading at $20.00. 52 52 1. (30 points) 53 Analyzed the company based on a discounted cash flow analysis. Based on the information above, 54 what would be GameGO's implied stock price? 55 56 57 WACC = 16.56% 58 Stock $18.10 SO PPBE 5 6 You are required to show all work to receive full credit 7 using a financial calculator, please list your inputs and the function used. 8 9 Game Go Inc. (GAME) is a digital gaming platform that is crushing its old school competition. GAME generates revenue from both 10 advertising on its platform as well as through in-app purchases. GAME's user base is expanding quickly and management is excited about 11 its future growth prospects. That said, as CFO, you are concerned about your cash position. 12 13 Selected financial information 14 (in millions, except per share data) 15 10 Income Statement Annual Balance Sheet 17 Actual 2020 Actual 2020 18 Sales 5 1,230,0 Cash $ 250.0 19 COGS 670.0 Accounts Receivables 437.5 20 Gross Margin 560.0 Inventory 325.0 21 SG&A 300.0 Other current assets 156.3 Restructuring Charge 50.0 Current Assets 1.168.B 23 Depreciation 85.0 687.5 24 Op Income 125.0 Goodwill 1688 25 Interest expense 15.0 Total Assets 2.025.0 26 Pre-tax 110.0 27 Taxes 22.0 Accounts payable 243.0 28 Net income $ 88.0 Accrued expenses 156.2 29 Other current liabilities 137.5 30 Common S/O 100.0 Current Liabilities 536.7 31 Long term Debt 187.5 32 EPS 0.88 Deferred taxes 293.8 33 Total Liabilities 1,018.0 34 Shareholders Equity 1.0070 35 Total Liabilities & Equity $ 2,025.0 30 37 Common Shares Outstanding 1000 38 Assumptions 39 Revenue is expected to grow 15% in 2021, 10% in 2022,5% each year for the next two years. 40 Cost of Goods Sold is expected to be 540% of revenue each year 41 Seling general and administrative expenses is expected to leverage 100 basis ponts per year as a % of Revenue 42 Depreciation expense is expected to be $900 milion each year 43 Maintenance capex is expected to be $50,0 million each year 44 Working capital is expected to grow at the same rate as revenue 45 All cash on the Balance Sheet is considered excess cash Taxes are projected to be 20% 47 This company will hopefully, continue forever. Assume the long-term perpetual growth rate is 20% 48 Debt is trading at $995 00, has a 5-year term, an 80% coupon rate paid semi-annually, and there are 187,500 bonds outstanding 49 Beta is estimated at 15. treasures yields are 2 5% and the expected return on the markets 12.5% 50 The common stock is trading at $20.00 51 52 1. (30 points) 53 Analyzed the company based on a discounted cash flow analysis. Based on the information above. 54 what would be GameGO's implied stock price? 55 56 57 WACC = 15.56% 58 Stock $18.10 46