GUIDE QUESTIONS

Laura Martin: Real Options in the Cable Industry

What function do equity analysts fulfill in a financial system? What constituencies

do they serve? What are their incentives?
Consider the multiples analysis developed in EXchibits 2,5, and 6. What
assumptions does this analysis rely upon?
Consider the DCF analysis presented in Exhibit 7. How realistic are the
assumptions?
In what ways might the stealth tier be incorporated into the DCF analysis and
multiples analysis? In what way is the stealth tier like a call option? What is the
underlying asset? What is the strike price?
Would you purchase Cox Communications on the basis of her analysis? Why?