Paramount valuation -1993

Cash flow forecast

year
0
year
1993
Sales
EBITD
Depreciation
EBIT
Tax
34%
EBIT(1-t)
Operating Cash Flow (EBITD-Tax)
Capital expenditures
Change WC
Asset sale
Net Cash Flow
Discount rate (1+WACC)^t
PV (1-5)
$ 1,973.63

1
1994
$ 4,905.00
$ 660.60
$ (162.00)
$ 498.60
$ (169.52)
$ 329.08
$ 491.08
$ (160.10)
$ (45.60)

2
1995
$ 5,264.30
$ 737.00
$ (172.00)
$ 565.00
$ (192.10)
$ 372.90
$ 544.90
$ (177.30)
$ (62.10)
$ 900.00
285.38 $ 1,205.50
258.70 $ 990.66

3
1996
$ 5,648.60
$ 790.80
$ (184.00)
$ 606.80
$ (206.31)
$ 400.49
$ 584.49
$ (176.70)
$ (66.50)

$
$

$
$

341.29 $
254.25 $

Terminal value
g2
CF6
TV year5
TV 0
Enterprise Value
Equity
P0

4
1997
$ 6,060.00
$ 848.40
$ (196.00)
$ 652.40
$ (221.82)
$ 430.58
$ 626.58
$ (202.90)
$ (71.20)

5%
$ 397.87
$ 7,490.76
$ 4,585.87
$ 1,973.63 $ 4,585.87 $ 1,007.10 $ 7,566.61
$ 6,553.61
$
54.61

5
1998
$ 6,500.70
$ 910.10
$ (209.00)
$ 701.10
$ (238.37)
$ 462.73
$ 671.73
$ (216.60)
$ (76.20)

352.48 $
238.04 $

378.93
231.98

WACC Calculation
S
B
S/B+S

120

Rf

Beta
5.68%
11.18%
7.05%
34.00%
4.65%
10.31%

Rs
Rb
t
Rb*(1-t)
WACC

1990
32%

Historical tax rate

Hard synergy calculation

Estimated synergies: Paramount -Viacom merger
Discount rate (1+WACC)^t
$
PV (1-5)
$ 654.52

Terminal value of synergies

g2
Synergies year 6

5%
234.15

55 $ 6,600.00
$ 1,013.00
0.867
Rm-Rf
1
5.50%

1991
37%

1992
31%

1
1994
134
121.47 $

2
1995
150
123.27 $

1993 Average
34%
34%

3
1996
171
127.39 $

4
1997
216
145.87 $

5
1998
223
136.52

TV of synergies year5
PV of TV of synergies
PV of all synergies

$ 4,408.35
$ 2,698.81
$ 654.52 $ 2,698.81

$ 3,353.34

Synergies per share

Current share price

$
$

27.94
54.61

Total value of paramount shares to Viacom

82.56

Valuation of Paramount in 1993

Cash Flow
Time
Sales
EBITDA
Depreciation
EBIT
Tax
EBIT-Taxes
Delta WC
Capex
Asset Sale
FCF

1993

34%

1
1994
4905
660.6
162
498.6
169.524
329.076
45.6
160.1
285.376

2
1995
5264.3
737
172
565
192.1
372.9
62.1
177.3
900
1205.5

3
1996
5648.6
790.8
184
606.8
206.312
400.488
66.5
176.7

4
1997
6060
848.4
196
652.4
221.816
430.584
71.2
202.9

5
1998
6500.7
910.1
209
701.1
238.374
462.726
76.2
216.6

341.288

352.484

378.926

WACC Calculation
Equity
No of Shar
Price/Share
Equity
Debt
E/V
D/V
Rf
Rm-Rf
Kd
Ke
Tax
WACC

Terminal Value
Growth Rat
V1998

FCF

120
55.5
6660
1013
0.8679786264
0.1320213736 0.152102 0.867979
5.68%
5.50%
7.05%
11.18%
34%
10.32%

5%
7481.1981700132 4578.608
1
285.376

$6,551.93 Value of Firm

Cash and Investments
Debt

2
1205.5

1007.1
1013

3
341.288

4
5
352.484 7860.124

Equity
Price/Share

$6,546.03
$54.55

0.075016
11.196
0.032805

Paramount valuation -1993

EBITD multiple

EBITD Multiple
Wald Disney
Time Warner
Turner Broadcasting

1993 Est 1994

13.3
12.2
11.2
10.4
14.8
11.9

Median
Average
Time Warner

13.3
13.1
11.2

11.9
11.5
10.4

Parmount EBITD
Estimated capital (medians)
Estimated capital (Average)
Time Warner multiple

$ 560.50
$ 7,454.65
$ 7,342.55
$ 6,277.60

$ 660.60
$ 7,861.14
$ 7,596.90
$ 6,870.24

Estimated equity (medians)

Estimated equity (Average)
Estimated equity (TW)

$ 7,448.75 $ 7,855.24
$ 7,336.65 $ 7,591.00
$ 6,271.70 $ 6,864.34

Estimated stock price (medians) $

Estimated stock price (averages) $
Estimated stock price (TW)
$

62.07 $
61.14 $
52.26 $

65.46
63.26
57.20

Paramount 1993
Income statement
Revenues
Cost of Goods Sold
SG & A
Operating Income
Other Income (expense)
Interest Expense
Interest Income
Earnings before Taxes
Provision for Taxes
Extraordinary Items
Net Earnings
Depreciation and Amortization
Working Capital
Capital Expenditures

1993
4,641.60
-3,047.60
-1,254.60

339.4
(6.6)
(94.0)
78.5
317.3

(109.2)
(9.1)
199.0

221.1
802.7
111.8

Balance sheet

1993
1993

ASSETS
Cash
Short-term investments
Trade receivables
Inventories
Other current assets
Total Current Assets
Property, Plant, & Equipment
Accumulated Depreciation
Net PP&E
Intangibles
Other Assets
Total Assets

Price per share

Shares outstanding

380.6
626.50
1,062.20
633.7

1993

LIABILITIES
Current Maturities of LT debt
10.1
Trade Accounts Payable
196.5
Income taxes Payable
64.5
Accrued Expenses and other 1,170.50

538.3

3,241.30
1,572.20
-382.4
1,189.80
1,560.30
1,454.1

7,455.5

54
120

Total Current Liabilities

Deferred Liabilities
Long-Term debt

1,441.60
871.2
1,002.9

Total Liabilities

3,315.7

EQUITY
Common Stock
Paid-In Capital
Retained Earnings
Translation Adjustments

119.6
778.1
3,252.2

Total Net Worth

4,129.8

Total Liabilities and Equity

7,445.5

(20.1)

Short term solvancy

Current ratio

2.248

Quick ratio

1.435

Finacial leverage
Debt/Assets

0.136

Debt/book equity

0.245

Debt/Market equity

0.156

Interest coverage (gross)

3.611

Interest coverage (net)

21.897

Profitability
Gross operating margins

0.073

Return on assets, ROA

0.046

Return on equity, ROE

0.048

Activity
Asset turnover

0.623

Receivables turnover

4.370

82 day credit

Inventory turnover

7.325

49 days

Market value
EPS
Price to earnings P/E
Market to book

1.658
32.563
1.569

Bankruptcy prediction
X1
X2
X3
X4
X5
Z score

Ratio
Coeficient product
0.241
1.2
0.290
0.437
1.4
0.612
0.046
3.3
0.150
6.397
0.6
3.838
0.623
1
0.623
5.512