Incremental Expected Sales and Cash Flows from Home Video Delivery Project

($1,000s)
Year
2001
2002
2003
2004

2005

2006

Revenues
EBITD
15% of sales
Depreciation
EBIT
Tax Expense
EBIAT
CAPX(a)
Investment in NWC

5,600
840
-275
565
-226
339
300
0

7,500
1125
-300
825
-330
495
300
0

1200
180
-200
-20
8
-12
300
0

2400
360
-225
135
-54
81
300
0

3,900
585
-250
335
-134
201
300
0

a--capital expenditures of $300,000 are expected to continue in perpetuity, and are in addition to the $1.5 million
initial investment.

n to the $1.5 million

Rf
Rd
Market risk premium
Marginal Tax Rate
Debt Beta
Asset Beta for
Kramer.com and Cityretrieve.com
Initial Investment (2001)

5%
6.80%
7.20%
40%
1.5
1.5 million

Incremental Expected Sales and Cash Flows from Home Video Delivery Project
($1,000s)
1
2
Year
2001
2002
2003
Revenues
EBITD
Depreciation
EBIT
Tax Expense
EBIAT
CAPX(a)
Investment in NWC
Add back depreciation
Free Cash Flow
Terminal Value
Total Cash Flow
PV at WACC
Enterprise Value
Less Initial Investment
NPV
Assumed Amount of Debt

15% of sales

1200
180
-200
-20
8
-12
300
0

2400
360
-225
135
-54
81
300
0

3
2004

4
2005

5
2006

3,900
585
-250
335
-134
201
300
0

5,600
840
-275
565
-226
339
300
0

7,500
1125
-300
825
-330
495
300
0

Rf
Rd
Market risk premium
Marginal Tax Rate
Debt Beta
Asset Beta for
Kramer.com and Cityretrieve.com
Initial Investment (2001)
($ 1,000s)

5.00%
6.80%
7.20%
40.00%
1.500
1500.000

Incremental Expected Sales and Cash Flows from Home Video Delivery Project
($1,000s)
1
Year
2001
2002
Revenues
EBITD
Depreciation
EBIT
Tax Expense
EBIAT
CAPX(a)
Investment in NWC
Add back depreciation
Free Cash Flow
Terminal Value
Total Cash Flow
PV at WACC
Enterprise Value
Less Initial Investment
NPV
Assumed Amount of Debt
Amount of debt
Interest Payment
Tax Shield on Interest
Interest Coverage
PV of interest tax shields
APV=All Equity NPV + PV Tax Shields

15% of sales

1200
180
-200
-20
8
-12
300
0

2
2003

3
2004

4
2005

5
2006

2400
360
-225
135
-54
81
300
0

3,900
585
-250
335
-134
201
300
0

5,600
840
-275
565
-226
339
300
0

7,500
1125
-300
825
-330
495
300
0

Rf
Rd
Market risk premium
Marginal Tax Rate
Debt Beta
Asset Beta for
Kramer.com and Cityretrieve.com
Initial Investment (2001)
($ 1,000s)

5.00%
6.80%
7.20%
40.00%
1.500
1500.000

Incremental Expected Sales and Cash Flows from Home Video Delivery Project
($1,000s)
1
Year
2001
2002
Revenues
EBITD
Depreciation
EBIT
Tax Expense
EBIAT
CAPX(a)
Investment in NWC
Add back depreciation
Free Cash Flow
Terminal Value
Total Cash Flow
PV at WACC
Enterprise Value
Less Initial Investment
NPV
Assumed Amount of Debt
PV of remaining cash flows

15% of sales

1200
180
-200
-20
8
-12
300
0

2
2003

3
2004

4
2005

5
2006

2400
360
-225
135
-54
81
300
0

3,900
585
-250
335
-134
201
300
0

5,600
840
-275
565
-226
339
300
0

7,500
1125
-300
825
-330
495
300
0

Rf
Rd
Market risk premium
Marginal Tax Rate
Debt Beta
Asset Beta for
Kramer.com and Cityretrieve.com
Initial Investment (2001)
($ 1,000s)

5.00%
6.80%
7.20%
40.00%
1.500
1500.000